Railways

HC Deb 13 June 2002 vol 386 cc323-66WH

[Relevant documents: First Report from the Transport, Local Government and the Regions Committee Session 2001–02 HC 239-I, and the Government's response thereto, CM 5472.]

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Caplin.]

2.30 pm

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

It is always a delight to see you in the Chair, Madam Deputy Speaker, not least because I am sure that you are one of the few people who can keep us in order with charm and talent.

An important part of the work of a Select Committee is to consider in considerable depth subjects of concern to the voter and traveller, as well as to the House of Commons and House of Lords. The Select Committee on Transport, Local Government and the Regions has an excellent record in considering urgent problems with care and in sufficient detail to be able to suggest one or two in-depth and important solutions.

The railway system was thrown into total chaos at the time of privatisation. The system needs to be integrated, and to be focused on safety and comfort. Its fragmentation has cost us dear. When the Government came to power, they took time to put a Transport Bill on the statute book that was capable of transforming the railway system and of having an immediate impact on how it was reorganised. I regret the length of time that that process took, as I am sure do many other people.

It was useful that the Select Committee chose to examine the refranchising of the railway system when there was considerable feeling that the privatised industry was not carrying out the tasks that it had been set at the time of the original changes. Once the Committee began to consider the problems in detail, it found that the division between a rail track authority and individual operating companies had not produced smooth integration or an efficient use of resources for the travelling public.

It did not surprise us that criticism of Railtrack, which was core to the railway system, was widespread. We found its performance entirely woeful. We thought it significant that one of the largest corporate fines ever imposed by a regulator had been imposed on Railtrack, because of its failure to fulfil its set task and its apparent inability to change or improve to ensure a better rail system.

That matters for both Her Majesty's Government and the traveller. The railway system is fundamental not only to transport but to economics and the quality of people's lives. The ability to move people and goods about is so fundamental that we all pay an enormously high price if the system goes wrong. The Committee found that, in the split between a core service such as Railtrack and the train operating companies, there was an immediate difficulty with the interfaces—in knowing who was responsible for what and who would be able to put right mistakes that arose.

We said that we wanted Her Majesty's Government to undertake several tasks. First and foremost, we said stability was needed in the industry, and that it should be returned as soon as possible with a high level of expertise and confidence. It is an extraordinary fact of life in this country that more than 3,000 people are killed every year on the roads, yet four or five deaths on the railways give rise to long and frequently virulent campaigns against that form of transport. We realise that that is because there are fewer major accidents on the railway system. Nevertheless, we had a good opportunity to say what had gone wrong.

The first problem was manifest: Railtrack was not in control of fundamental aspects of the rail system. The use of contractors and the constant dilution of the safety case almost inevitably meant that it had difficulty assessing the quality of the work that was being done to maintain and improve the railway. It often had insufficient trained staff within its own complement to ensure that it knew what was being done in its name. Furthermore, the nature of its relationship with the operating companies meant that those involved tended not to suggest ways of working together to produce the best system, but to blame one another for various aspects of railway administration. It would have been better to decide such issues jointly, and to operate in a useful, co-operative mood.

We said that first and foremost it was important that the Government had begun to understand that the Strategic Rail Authority, which they created, had not, under its previous chairman, played the role that we had hoped it would. It had not produced plans, leadership or a clear view of where it was going.

It then became obvious that Railtrack was in considerable financial difficulty. Some hon. Members will argue this afternoon that it was entirely viable and, indeed, capable of meeting all its debts. Choosing its language carefully, the Committee said that, on balance, it did not think that that was the case. It said that the previous Secretary of State was right to say that Railtrack's constant reiteration of its need for extra funds and the fact that it returned to the Department for extra support were clear enough indications of its problems and of the need to put it into administration.

The previous Secretary of State was very open with the Committee. He gave us clear evidence, and offered to show us the minutes of his meetings. I always find it interesting when Ministers are sufficiently confident to offer Select Committees minutes of meetings in which they have taken part. That shows that they, at least, are happy with what happened.

Chris Grayling (Epsom and Ewell)

Will my hon. Friend give way?

Mrs. Dunwoody

The hon. Gentleman is ruining my career again.

Chris Grayling

May I remind the hon. Lady that the minutes of the key moment of the key meeting disappeared, and were written a number of weeks later? We always welcome openness through the publication of minutes, but there was no timely record of what took place at that meeting.

Mrs. Dunwoody

We must be fair to the former Secretary of State. He sat in the meeting, and he thought that the minutes existed. Indeed, he offered the Committee a copy of them, and we really cannot expect more of a Minister. Had previous Governments followed the same practice, a lot more information about what was happening would have come into the open much earlier.

The Committee's argument was not with the previous Secretary of State. He said that the Government could show that Railtrack was failing, because it was still going to them for more money. It did not fulfil its key objectives or hit its targets—that was the opinion of the rail regulator, not the Department. After a difficulty one emotionally charged weekend, the rail regulator told the Committee that Railtrack was the author of its own misfortune. He said that for the simple reason that it had never consulted him about its financial difficulties. Had he been asked, he would have had the chance to do something about its economy, but he was rung late on a Saturday night and asked whether he could produce millions of pounds by the Monday morning. Not surprisingly, he said no. At no point did Railtrack return to reopen those negotiations. To be fair to the previous Secretary of State, he was quite open with us in the information that he provided.

We said that it was essential for the successor company to Railtrack to focus above all on safety, maintenance and performance—not profit. We said that it had to be set up quickly, and that Railtrack's period of administration had to be ended as soon as was useful and possible. We said that we wanted a successor company to have direct responsibility for inspecting the network and to employ directly those responsible for its maintenance and renewal. We wanted much greater emphasis put on the engineering skills and experience of the staff.

I am a member of the National Union of Rail, Maritime and Transport Workers. It is clear from the evidence—I am speaking for myself and not for the Committee—and the constant stories that I have been told about the way that contractors work, that even if they have been slightly misled, the majority of people working for contractors are very worried about safety standards, how people are trained and the way that they are allowed to work on the rail system. The workers believe that safeguards are not in place and that individual contractors have been only too willing to turn a blind eye to the abandonment of practices essential to the protection of railwaymen and railwaywomen. That calls into question the quality of the maintenance and operation of the rail system.

Above all, the Committee was very concerned that Ministers did not appear to have a contingency system in place. It did not require a very great brain to foresee that Railtrack might get into difficulty. The company did get into difficulty, and we were surprised that Ministers were not ready with an alternative and had to take rapid action in a short period. We thought that the information available ought to have been acted on even earlier, and that that ought to have been very plain, even to the Government.

We want the successor to Railtrack—whatever it is called—to have sufficient money to be able to carry out its job. The modernisation work that is still required in the rail system will need large sums of public money, and that will continue for a long time. It cannot be funded by the fare box. The Treasury must accept reality and stop arguing that somehow or other there is a magic formula—that other people can be made to pay. We suggested that a full assessment should be carried out before using any alternative source of funding.

We heard a lot about special purpose vehicles. The Committee was unconvinced of the future efficiency of such schemes, because little detail was supplied as to who would be responsible, who would take the risk and who would have ultimate responsibility for any disruption to the network. There were no detailed arrangements for transferring enhanced assets to Railtrack's successor. Those are all important questions. If we do not have answers to them, it is difficult to judge whether a new form of financing called a special purpose vehicle will be the answer to our prayers.

We also believe that there was an opportunity, in the allocation of the new franchises, to rethink the future of the railway. We can argue about whether privatisation could have been a success, but the reality is that this is an integrated system. The operators must work together, not as independent companies, because rail has no opposition. Fashionable economists might say that the opposition to the railway system is the motor car or the plane—the bicycle has not yet been cited, but I am sure that it will be in due course. However, the reality is that for those who need to use trains there are very few alternatives. The idea that when one cannot get a train one can always hop on a bus begs an important question, because buses take far longer, do not necessarily go where one wants to go or turn up when one wants them to turn up. Buses cannot be regarded as a substitute for a train service. The Government and the House of Commons must confront that problem.

The argument originally used at the time of privatisation was that subsidy from the public purse would gradually disappear, because companies would become so efficient that they would be able to replace all the cash. That has manifestly proved to be nonsense, and many of us said so at the time—sometimes it is nice to be able to say "I told you so". It is clear that the railway system will largely depend on the public purse for one, two or three decades. Only by supporting an efficient rail system can we reap the benefits.

We want the Government to take short-term measures and to renegotiate many of the franchises, based not on how many pennies can be extracted from private enterprise partners but on the quality of work. Like other hon. Members, my postbag is full of the hundreds of letters that I receive every day detailing the conditions in which ordinary passengers travel—not only those who travel into the centre of large cities but those who travel between cities. Those of us who use the west coast main line do not need to be told about the conditions, because we are subjected to them every week.

This country has a real problem. If we want an efficient form of transport, we shall have to pay for it, but not, as appears to be happening at the moment, by train operating companies constantly putting up their fares above the level of inflation or making railcards virtually unusable through the terms and conditions that they apply to them. Those companies comply with a price cap for only a very small number of services.

People need and want to use railways. If they have clean, comfortable and safe transport, they will enjoy using railways, but they will not leave their cars at home if the Government continue to make motoring cheaper and travel by public transport more expensive. It is not an argument between the car and the bus: those who use the train frequently drive to the station and those who get off the train at the other end frequently take some form of wheeled transport to get to their destination. The Government must accept that they need a coherent policy that encourages more people to use public transport. The way to do that is to ensure that it is reasonably priced, safe, clean, comfortable and absolutely reliable—that it arrives when it is supposed to arrive and gets to where it is supposed to go. Our report sets out some straightforward undertakings that we thought were important. The plan that we proposed is useful and could be followed by the Government to advantage.

I shall say one short word about the work of the Transport Committee and Select Committees in general. As long as members of such Committees attend often enough and remain through the sittings, they will hear a variety of evidence, including many written submissions. Indeed, the evidence submitted to us is varied and sometimes contradictory, but it is always useful. People who are called before our Committee as witnesses have given interesting written evidence. That places responsibilities on Members of Parliament: they have to turn up, do their homework, think reasonably intelligently about the questions that they will ask and surprise themselves by listening to the reply—a task that does not always enamour itself to politicians. I believe that since it was constituted after the 1997 general election, the Select Committee has done a responsible job. It worked hard and produced many more reports during the first Session than any other Select Committee. It has continued to address the whole gamut of transport issues during this Session. If it is dissolved, that will be a great loss, and if it is replaced by a slightly more amenable Committee, I shall not be surprised. The House of Commons operates best when it has sufficient confidence in its hon. Members to allow them to ask difficult questions of any elected Government, to wait for the replies and to use that process as the basis of its reports. That is how it has always operated.

This report is slightly different from some others because it contains a clear minority report from two Committee members who are part of Her Majesty's Opposition. Therefore, unlike the others, it is not a totally agreed text. However, that is an exception. The majority of the Committee's reports have been agreed, because some people give a little and others are prepared to abandon one or two of their beloved ideas. That is how Select Committees work, and it is a credit to the House of Commons and to the parliamentary system.

I have regarded it as an honour to chair the Committee and have enjoyed it. I find it very amusing. I do not regard myself as in the pocket of the Conservative Members, or even of the Whips Office or the Back-Bench Labour Members. However, to have served on a Transport Committee that has, if I might say so immodestly, produced high-quality and properly researched work, is something that I value and that I hope the House of Commons will continue to value.

2.51 pm

Miss Anne McIntosh (Vale of York)

On a personal note, may I declare a number of interests with which the members of the Committee are only too familiar? I owned shares in Railtrack and own shares in Eurotunnel and First group, but it is not my intention to set up as a financial adviser. In view of the latter remarks of the distinguished Chairman of the Transport Committee, the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), may I say what a privilege it has been to serve under her chairmanship. It is no secret that politically and personally we do not agree on everything. Sometimes she must feel that we agree on nothing, or very little. However, I have learned a huge amount from her, and it has been a privilege to serve under her and her colleague, the hon. Member for Denton and Reddish (Andrew Bennett). Long may that continue.

I should also like to put paid to certain allegations, nuances and innuendos that were made in a recent article in Tribune magazine. It may not surprise you, Madam Deputy Speaker, that I do not normally subscribe to the magazine—

Madam Deputy Speaker

Order. I must ask the hon. Lady to confine her remarks to the report.

Miss McIntosh

There were allegations that there was all-party support for the main Committee report. As the Chairman has just said, Conservative Members did not, regrettably, hijack the main Committee report, despite our best endeavours, but we felt so strongly that we were moved to table a minority report. It is a matter of regret to me that we were unable to persuade distinguished members of the Committee to join us in our views. There is still time before the end of the debate for them to change their minds.

The Chairman commenced by saying something with which I disagreed. She called the process of privatisation faulted and fragmented. That is the main issue on which the minority report showed a strong difference of opinion. I do not wish to dwell on that, but if the argument is that the fundamental process of the original privatisation was flawed, the Government compounded that fragmentation from 1997 and made the situation worse. They created the Strategic Rail Authority and the Office of the Rail Regulator and then proceeded to ignore the advice of both. We have recorded our disappointment in the minority report and in the main report.

The previous Secretary of State ignored the advice of the former chairman of the SRA, notably with regard to his recommendation to give a long-term renewal of the east coast main line franchise to GNER, which was my personal wish. I do not have a financial interest in GNER, but I use it most weekends to go home and I know that constituents overwhelmingly supported such a franchise renewal. The decision not to award a long-term renewal of that franchise is jeopardising GNER's investment in rolling stock, which is regrettable for the travelling public.

Even more serious was the fact that the then Secretary of State overruled the advice of the rail regulator, particularly when Railtrack was put into adminstration. I do not wish to revisit this old chestnut but, in my view, contrary to what the hon. Member for Crewe and Nantwich suggested, the incontrovertible evidence was that Railtrack was commercially viable and had returned a very good financial result in that year. That is why our minority report tabled a robust amendment in paragraph 26(a) on page 56 expressing our extreme concern that, following the Government's refusal to support Railtrack and their decision to force it into administration, private sector confidence in the railways has evaporated.

Mr. George Stevenson (Stoke-on-Trent, South)

Would the hon. Lady care to reflect on the evidence that the Committee received that, in spite of suggestions that a review by the rail regulator may have been appropriate in January, it was not taken up by Railtrack and, indeed, not taken up when the High Court agreed the administration order.

Miss McIntosh

I do not want to get drawn into a long, protracted argument on this point, because, with the greatest respect to the hon. Gentleman, there is evidence that points to the contrary. Railtrack did not oppose the order in the High Court for the simple reason that we had taken powerful evidence from the rail regulator that he had, as an independent adviser, given certain advice to the then Secretary of State that he would recommend that Railtrack be allowed to have the rescue package. That is regrettable, especially given the Government's 10-year transport plan. Approximately 55 per cent. of the £34 billion of investment forecast in the 10-year transport plan for rail transport is to come from the private sector. I firmly believe that, by putting Railtrack into administration, the then Secretary of State destroyed industry and private sector confidence and security in any future investment that it may have had. Should the Minister wish to agree with me, he need not respond to that point, but if he disagrees, perhaps he would argue his case to rebut the minority report.

Over the past five years, the Government have failed to act to improve rail freight. There is all-party agreement in the Committee and elsewhere that more freight should be moved by rail instead of by road. Ministers in the Department for Transport, Local Government and the Regions and in the Home Office—I gather that this is largely a Home Office matter—have failed to act to improve rail freight through the channel tunnel. That is a matter of regret on which the Committee commented several times, and it has had a great impact. The Government have failed to meet even their targets in the 10-year transport plan. I have tabled several parliamentary questions on that subject, but have not yet received satisfactory answers. As a result of the Government's failure, one of the companies involved, English Welsh and Scottish Railway, has had to take a complaint to the commission and losses have been incurred, not least by Potters of Melmerby in my constituency.

I am delighted that the Committee will visit northern England to take evidence on railway franchises and operation. In the minutes of evidence for Wednesday 10 April, on page 9, paragraph 28, I had the opportunity to ask the present chairman of the Strategic Rail Authority whether the poor industrial relations and bad strike record of one of the applicants for the new franchise currently operated by Arriva Trains Northern, formerly Northern Spirit, might jeopardise its case. I was delighted that Mr. Bowker said that that would be taken into consideration.

With regard to our second conclusion at paragraph 26(b), if the Strategic Rail Authority is to remain a viable force, the Government must allow it to operate independently, free from Government interference, and it must be held to account and publish an annual report and update its strategic plan. I hope that the Transport Committee will hold the SRA to account.

The hon. Member for Crewe and Nantwich also referred to the relationship between contractors and Railtrack. I do not disagree with her entirely, but I hope that the recommendations in the Cullen report will be implemented as soon as possible. As a shareholder, I have taken a keen interest in these matters, but I understand that it is not unusual for independent contractors to provide their services as subcontractors to other engineering systems besides the railway. I regret that the three central recommendations of the Cullen report on managing contractors were not implemented by the deadline of March 2002—that was mentioned in Railnews. I fervently hope that the Committee and the House will put pressure on the Government to ensure that those three central recommendations are given effect as soon as possible.

Many questions remain unanswered following the demise of Railtrack, including several points to which the hon. Lady and the report referred. For example, false hopes were raised by the previous Secretary of State on the funding of Railtrack from April last year, particularly with regard to Renewco. It is deeply regrettable that on 5 October, after the October deadline, the Office for National Statistics ruled that the use of Renewco as a vehicle would run counter to Government policy. It would have been deemed to have had public sector spending implications and would therefore be considered inappropriate. I believe that that gave false hope to Railtrack—the company and its shareholders. That is regrettable.

Despite the hon. Lady's most charming exhortations, and despite the fact that we were in agreement with many of the Committee's conclusions, we had no alternative but to make a minority report. In it, we record the fact that we were appalled at the Secretary of State's decision to apply for railway administration. We believe that future private sector investment, to which the Conservative party is still committed, has been jeopardised because its security appears to have been threatened by the unilateral decision to put Railtrack into administration. The demise of Railtrack and the failure of the previous Secretary of State to agree long-term franchise renewals will have far-reaching implications for the whole railway industry.

Looking ahead to Newtrack, the successor company to Railtrack, we had the opportunity to question the previous Secretary of State on the specific detail of how the private sector would be involved. However, on page 45, paragraph 157, the minutes of evidence show a distinct lack of clarity from the Secretary of State. The Committee heard compelling evidence from much of the industry, which thought that its ability to contribute would be threatened.

We have a new Secretary of State for Transport, and I wish him every success. I wish to declare an interest. The right hon. Member for Edinburgh, Central (Mr. Darling) and I are both non-practising members of an elite club—the faculty of advocates: we are members of the Scottish Bar. I hope that he will succeed where others have failed. I hope also that the Committee, and any future Committee, will hold him to account, and that it will monitor and scrutinise the Government's ability—or inability—to meet present and future targets.

I commend our minority report to the House. It proved that the previous Secretary of State failed to achieve the Government's targets.

3.7 pm

Mr. George Stevenson (Stoke-on-Trent, South)

I want to refer to those sections of the report that deal with the future of the railway infrastructure. First, however, I wholeheartedly concur with the congratulations and warm regards that have been expressed to my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody). She has been described as formidable—she has been described also in less congratulatory tones—but in all her doings, I have never had her down as a knife-wielder. I echo the warm regards.

I shall confine my comments to the strong recommendation in paragraph 54 on page 29 that the Government should consider the role and responsibility of the Strategic Rail Authority in relation to maintenance, renewal and development of rail network. I shall return to those words, which I believe are crucial.

Unlike the hon. Member for Vale of York (Miss McIntosh), I believe that the action taken in October 2001 by the previous Secretary of State was right. The majority report certainly reflected that, as the majority of the Committee believed that there was no alternative. Rail privatisation has been a disaster. Disaster is the appropriate term, as it has been a financial and economic disaster and, in some tragic ways, a human disaster.

Chris Grayling

The hon. Gentleman refers to a human disaster. It is important to remind hon. Members that the Cullen report specifically says that safety on the railways has improved rather than worsened since privatisation. We all regret deeply the tragic accidents that have happened on the railways in recent years, but they cannot simply be attributed to privatisation.

Mr. Stevenson

The hon. Gentleman is correct in his assertion about that report. My view—and we shall have to agree to disagree—is that although the railways remain a relatively safe method of transport, we have witnessed, and continue to witness, human disaster. I make no apologies for raising that point.

Privatisation has been a disaster for the railways. I shall refer to the future and emphasise three problem areas, which are noted in the report, that the Government have begun to tackle only partly. I emphasise again that I welcome the previous Secretary of State's decision on Railtrack in October 2001. Any cursory glance at the evidence shows that the problems were remarkably consistent throughout the industry. Three factors exposed our railways to enormous blight: the pre-eminence of the profit motive and shareholders' interests being put before safety; the fragmentation of the industry; and the confidence that needs to be generated, particularly from the private sector, if the Government's 10-year investment plans are to have any chance of success.

I want to deal with the Government's action and the contents of our report on the profit motive. It has been damaging to place shareholder interests before anything else. The evidence was clear from the previous chief executive of Railtrack—he is now the chief executive of Woolworths, although that is another story. There was a clear conflict between the profit motive and shareholder interests and the safety and infrastructure of our railways. The evidence is clear, and the question is whether we can be confident that the Government's actions since October and their pronounced intentions for a replacement will remove the conflict between the profit motive and the interests of the railways. [Interruption.] My hon. Friend the Minister is nodding his head. I understand why he is gesticulating in that way.

The previous Secretary of State said in his evidence to us that his preferred model was a not-for-profit company limited by guarantee. I am not sure how certain he was about that intention, because he said: I am not sure that is the model that we will end up with at the conclusion of the period of administration. It is clear that he was not, by any stretch of the imagination, entirely sure that the preferred model would lead us to where we all want to be.

My concern, which is reflected in the report, is that a not-for-profit company without shareholders will still seek to make a profit. Profits may be ploughed back into the industry instead of going to the shareholders, but they remain profits. That is an important point. It is not a subjective view, but one shared by the rail regulator, Mr. Winsor, in his evidence to us. I will not go through the whole of his evidence, but I shall quote one piece of it. He argued that the not-for-profit company should operate on a commercial basis, and when I asked him how he interpreted that, he said: The company is operating so as to make a profit and avoid a loss.

The rail regulator, who is responsible for setting the financial framework in which the new company will operate, is already saying that it will be a profit-making company. The new company may not distribute profits to shareholders, but the profit motive is clearly central to its establishment. Other factors also indicate that, in spite of the Government's well-intentioned and necessary actions, we will still have a railway industry shot through with the profit motive.

We are told that we could have 15 special purpose vehicles, which constitutes investment by the private sector in the development of strategic rail capacity. I readily admit that I am not a member of the honourable company of advocates and am certainly not an economist—I am an ex-bus driver who used to work down the pit. However, one does not have to be a person of letters to recognise that if a private company invests heavily in an infrastructure project, it will want a rate of return. It is unrealistic, if not naive, to suggest that private investment in special purpose vehicles will not be subject to the maximum transfer of risk from the private to the public sector and to a rate of return that will make our eyes water.

Those two realities, in addition to the status as a so-called company limited by guarantee, convince me, as a privileged and proud member of the Select Committee, that the railway industry will remain shot through with the profit motive. The fact that the public purse will pay for those profits is neither here nor there, because we will have shareholders in special purpose vehicles and a company looking to make a profit. Who says so? The rail regulator. I am not convinced that the Government have minimised the profit motive. All the evidence received from across the board suggests that the profit motive and the running and development of our railways are simply not compatible.

Mr. Don Foster (Bath)

I apologise for interrupting the flow of the hon. Gentleman's remarks, which are fascinating. Before he moves away from the specific issue of the new Railtrack body, does he agree that tough regulation is needed for any monopoly? Whether that regulation would be enforced through the SRA or another regulatory body is a matter for separate debate. There is a duty to ensure that everything is done in the public interest, as competition regulation requires. Does he agree that the Government's model of moving to a not-for-profit company or a company limited by guarantee is better than the existing one, but could be significantly improved if the public interest were emphasised more?

Mr. Stevenson

Yes. I hope that the hon. Gentleman will forgive me, but I shall return to that point in my concluding remarks.

The other blight on the industry is fragmentation. The minority report did not challenge the evidence for that, as any member of the Committee who sat through the evidence will know, but I note that many Members present did. Let us consider how the Government propose to remove this blight, which should be removed or at least minimised. The Government are telling us not to worry about it too much as they anticipate that as the years roll by we will have 10 or 15 train operating companies and 10 or 15 franchises, not 25. The rail regulator appears to take the same view. Fine. We will wait and see if that rationalisation happens. I know that the Government accept that fragmentation has blighted the industry, as the Secretary of State says so.

Miss McIntosh

Without going into any great detail, let us assume that there is a difference of opinion. The hon. Gentleman argues that there is fragmentation. Does he agree that the Government compounded that fragmentation by creating the Strategic Rail Authority and the rail regulator, and then dissociated themselves from the advice of those bodies?

Mr. Stevenson

No, I do not accept that. The Committee produced a report, which I believe was unanimous, that congratulated the Government on setting up the SRA. This is the first time in many years that a strategic vision has been possible. I am not the only one who says that. We based our report on evidence, not individual opinions. I asked Mr. Christopher Garnett, the chief executive of GNER, would you agree that one of the major blights on the railway industry has been fragmentation? He said, "Yes." That is not a political or dogmatic opinion, but a statement from a major player in the railway industry.

What have the Government given us? We had Railtrack, and we have the SRA and the rail regulator. The new company, Network Rail, will look after the maintenance of the current network, and the SRA will be responsible for developing the new network, which is another split. Some 15 special purpose vehicles will develop their own bits of railway throughout the country. There will also be up to six regional companies, which are offshoots of Network Rail. If fragmentation is a blight on the industry, how will the new structure reduce fragmentation? I argue that it will do exactly the opposite: it will increase fragmentation, which does not bode well for the future development of the railways along the lines indicated in the report, which we all want.

Mr. Malcolm Moss (North-East Cambridgeshire)

I presume that the hon. Gentleman signed up to the majority report. I shall highlight two paragraphs. In paragraph 29, the Committee expresses its concern about the new franchise for East Anglia going to Liverpool Street and states that it is not convinced that having one franchise operating from one London terminus is a good thing. However, in paragraph 56, on vertical integration, the Committee concludes that there is no evidence that vertical integration would work. How could the hon. Gentleman sign up to both of them?

Mr. Stevenson

The debate on vertical integration was interesting. Some doubts were expressed, particularly by the train operating companies, that vertical integration was the way forward. I share that doubt, and the sections of the report to which the hon. Gentleman referred reflect that. The situation in London is not typical of what the rest of the country is experiencing, but although the hon. Gentleman is right to quote from it, the tenor of the report in many paragraphs reflects the evidence that we took that fragmentation is a blight on the industry.

Mrs. Dunwoody

It is important to understand that all the companies told us that vertical integration has not been proved. They do not know whether it will work, but they are frightened that the Government might take an area, such as Scotland, do a trial and then say to the rest of the country that it works in that area. It is an important point. There is no inconsistency in the arguments. There was a clear acceptance by the industry that it had no evidence that vertical integration would work.

Mr. Stevenson

I am grateful for my hon. Friend's intervention.

The last matter that I want to mention is investment and confidence in the future. It will be no surprise to hon. Members that I have serious concerns about the removal of the profit motive. As I have said, I think that the industry will still be shot through with the profit motive in the future. I have also expressed my concerns about fragmentation, which is likely to get worse in spite of the Government's best efforts. Rather than the actions of the Secretary of State being to blame for the private sector's diminished confidence about investing in railway infrastructure, it is those two areas that the City and the private sector have doubts about. Until we act decisively on those two areas, the confidence that we need from the private sector will not be forthcoming.

What do we need to do? I think the logic is compelling. All the work that is being done—or not being done, as in the case of the east coast main line—on the railway infrastructure is, with one exception, either paid for directly or guaranteed by the taxpayer. As an example, I quote from my questioning of Mr. Grant, then the chief executive of Railtrack, about the east coast main line. I asked him who is paying for it, and he replied, "SRA is paying." I asked, "In total?" and he said, In total… The agreement reached so far…is for £28 million of development work. The SRA is paying for it; the Government are paying for it. I asked the Secretary of State who is paying for the east coast main line and he confirmed that. I also asked him who is paying for the west coast main line. Every single penny of phase 1 of the west coast main line—in excess of £4 billion—is coming from the public purse. The second phase is being held up because costs have escalated to £7.5 billion, £10 billion—who knows?—and the Treasury is baulking at the prospect. All the infrastructural investment in this country's railways is, with one exception, either guaranteed or paid for directly by the public purse. Public sector responsibility for railway infrastructure is important. It is abject nonsense to split the maintenance of our current railways from the development of new railways.

The entire railway infrastructure, including maintenance and development, should be incorporated within the Strategic Rail Authority, for which the public has paid and will continue to pay. We do not have the commitment to the public interest that the circumstances demand. As we heard in evidence, the private sector invests in rolling stock, but not necessarily in infrastructure, and has a formidable job to do in operating our trains. The interface between the public and the private is not the Government but the rail regulator. In future, the Government—probably the present one—will be faced with that compelling logic. We are half way there: we now need the Government to take the next step in the public interest.

3.30 pm

Chris Grayling (Epsom and Ewell)

I rise to speak as co-author of the minority report and co-hacker, but I start by paying tribute to the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) who was a fair, if robust, Chairman of the Select Committee. The idea that anyone could hijack her Committee is a fantasy writ large.

I also pay tribute to Select Committee members of all political persuasions. Our debates took place in good spirit, despite significant divisions over certain aspects of the report. It was a happy and constructive Committee and I hope that the reconfiguration following the reshuffling of Government portfolios will not destroy the Committee's valuable parliamentary contributions. Parliament would be a poorer place if the Committee failed to make the same constructive criticisms that it had in the past.

I shall start by focusing on aspects of the minority report and then ask the Minister about developments that took place since the report was published, which remain pertinent to its content.

Government Members have spoken about privatisation. I am no universal defender of every aspect of it. Some aspects did not work as intended, but I do not accept that everything bad is attributable to privatisation. There is much to be proud of in rail privatisation—not my words, but those of the Strategic Rail Authority in its plan published in January. The SRA is a creature of Government. We should recognise that consensus exists between the Government and the Opposition that privatisation included much to be proud of and has worked quite well.

The minority report refers to the strong growth in rail usage since privatisation and to the investment in new locomotives and wagons in the freight industry, and in rolling stock in the passenger industry. It highlights many positive developments on the network during the past few years. It also provides some specific examples of private companies making a difference—the Chiltern franchise, for example.

I was brought up near the Chiltern line, which today bears no relation to the form that it had under British Rail. There are services and new lines on the route now that would never have been dreamed of in those days. Services now go to Kidderminster and Birmingham when once they made it up a single track to Banbury. That is one example of positive developments. Likewise, we are now seeing an expansion of cross-country services from Basingstoke to East Anglia and on a number of other routes throughout the country. There have been some powerful service innovations since privatisation.

The rolling stock industry is another example of success. Indeed, other countries are seeking to adopt the leasing formula, which has been a strong way of delivering substantial new rolling stock to the network. Having been ordered two, three, four and five years ago, that stock is now beginning to come on stream, and that is one of the real fruits of rail privatisation.

I intervened when the hon. Member for Stoke-on-Trent, South (Mr. Stevenson) referred to safety. I differ from him on this point, although not in relation to the circumstances of the individual accidents that have taken place, because they clearly resulted from structural, operational and human failings within the privatised rail industry. My point is that those failings are not unique to the privatised industry. I think back to the Clapham disaster of 15 or so years ago, when human error and failings in the engineering environment caused a disastrous accident under BR. Over the history of BR, there were many such incidents, but every incident, whether under BR or the private sector, is regrettable and lessons have to be learned.

I cannot escape the conclusion that came from Lord Cullen, of all people: the trend of improved safety on the railways that has been the case over generations has continued since privatisation. Any of us who jumps on the bandwagon—I am not accusing members of the Committee, but it does happen in this place—to accuse rail privatisation of having caused accidents is in danger of undermining confidence in the rail industry, and we all know that that would not be the right thing to do. Rail is a safe way to travel—much safer than the roads—and we should do nothing to undermine it while working to improve it.

Mr. Mark Lazarowicz (Edinburgh, North and Leith)

No hon. Member would blame privatisation for all safety problems on the railways, but I am sure that the hon. Gentleman is aware of the respected commentator, Christian Wolmar, who regularly writes on railway matters. In his most recent article, he says of safety on the railways: We are back to the way the industry was privatised and fragmented, which introduced a new and incalculable risk into the railways which has caused these disasters: interface risk. Did not privatisation introduce a new risk into the railway system and is not that why Mr. Wolmar concludes: The Tory ministers who foisted an unworkable structure on the railways have blood on their hands"?

Chris Grayling

I know, like and respect some of Mr. Wolmar's work; I do not always agree with him. In this case, I prefer to take the opinion of Lord Cullen, who looked exhaustively through all the evidence surrounding the accidents into which he chaired inquiries. His report clearly says that the trend of improved safety on the railways has continued since privatisation.

Mrs. Dunwoody

May I point out that that trend started under British Rail? Some of the things now claimed for the privatisation of the railways are actually changes that were instigated by the safety divisions of British Rail. Central door locking is a classic example; it made an immediate impact on the number of deaths. The two-year period afterwards was directly attributable to what happened under British Rail.

Chris Grayling

I still say that I have yet to hear anyone seriously dispute Lord Cullen's conclusion that over generations the trend of improved safety has continued. As I said, there have been structural failings, but it is not right to say that all the problems are because of privatisation.

The minority report aims to highlight our severe misgivings about what took place last year. As Opposition members of the Committee, we are committed subscribers to the idea of the importance of the railways. However, we believed that the actions of the Secretary of State last year were likely to retard rather than help the development of the railways, and I fear that subsequent events have reinforced our views on that front. We heard a number of worrying elements in the evidence. There were inconsistencies from the Secretary of State and some degree of evasiveness, for example, in the reporting of his meeting with John Robinson, the chairman of Railtrack last July. There was a lack of willingness to answer questions.

The Secretary of State strenuously avoided answering the question, put to him repeatedly, about the date on which he took the decision to draft the proposed legislation to bypass the rail regulator and to remove his right to carry out an independent review of Railtrack's finances. We subsequently learned from the reports about the meeting that he held with Pam Warren a month before Railtrack was put into administration that he had been thinking about it for a considerable period before he took the decision. Pam Warren's evidence made it clear that the decision was not taken at the last minute.

We heard about a lack of consultation. I was particularly worried that the Secretary of State should have dived into a process like this without taking serious advice from the people who could have steered him one way or another. Sir Alastair Morton told us that he knew nothing about what had happened. The Strategic Rail Authority knew nothing about it. Tom Winsor, the rail regulator, knew nothing about it either: his evidence showed that he was shocked when the Secretary of State told him what was planned.

Much of that has come home to roost. It contributed significantly to the Secretary of State losing his job. We have also seen the Government forced into a U-turn over compensation to shareholders. Their initial dogmatic approach was that shareholders do not matter but they have now been forced to face the reality that one cannot walk all over shareholders and expect to carry on regardless in an environment where private money is needed. Ironically, the Government will end up spending more than Railtrack asked for in the first place.

Mr. Stevenson

While the hon. Gentleman is on that subject, would he care to attempt to answer the question that I asked of the hon. Member for Vale of York (Miss McIntosh)? Why did Railtrack not take up the option of seeking a review from the rail regulator in January of the year in question and still had not taken up that option nine months later?

Chris Grayling

My immediate answer is that I think that the Railtrack management was very foolish not to object to the High Court action and not to pursue its claim for an interim review. However, I can understand why it did so, given that it had just discovered that the Secretary of State, in an almost unprecedented step, had informed the independent rail regulator that if he took a decision that favoured Railtrack he would have his powers removed by Act of Parliament.

Mr. Stevenson

This is a crucial question. I am not talking about the events of late September and early October that were reported to us in evidence from the rail regulator, but about events of the previous January. Why, from January to October, when Railtrack had a perfect entitlement to seek a review of its financial base, did it refuse to take up that option?

Chris Grayling

The hon. Gentleman raises an interesting point. We have to think back to the timing of the establishment of the budget for control period 2, which was produced immediately after the Hatfield crash, although the detailed work was done before then. As the financial consequences of Hatfield became more clear, Railtrack became increasingly aware that it would require more money. At the same time, Tom Winsor was making a number of public statements to say that Railtrack was over-ambitious in its financial demands. He used the phrase "begging bowl".

Early last summer, one of the City institutions that provided finance to Railtrack wrote to the company expressing grave concern about its relationship with the rail regulator. I know that because I have seen the letter. It said that if the matter was not resolved, it would undermine the company's ability to raise finances in the markets in future. My belief is that there was a fundamental breakdown in the relationship between the rail regulator and Railtrack, which ultimately led it to go to the Government rather than the rail regulator to sort out its financial problems.

Miss McIntosh

I apologise for disturbing the flow of my hon. Friend's speech. The hon. Member for Stoke-on-Trent, South (Mr. Stevenson) seems to be disingenuous in overlooking two points that I raised, one about Renewco and the other about the interim review. Renewco was meant to be part of the funding that was disqualified only after Railtrack was put into administration, which might be another reason why Railtrack did not oppose the High Court review.

Chris Grayling

I thank my hon. Friend for that. It is important to remember that John Robinson said publicly that he did not ask the Government for more money. He asked them most immediately for a letter of comfort that would enable Railtrack to raise bond finance in the markets.

Mrs. Dunwoody

Will the hon. Gentleman explain to those of us who are very simple the difference in real terms between asking for money and asking someone to guarantee every penny that is borrowed?

Chris Grayling

The key issue is the lack of confidence in the City that led Barclays Capital to send a letter to Railtrack to say that future powers to raise bond finance would be jeopardised by the problems between the company and the rail regulator. The purpose of seeking a letter of comfort was to reassure possible investors that the Government would continue to support Railtrack and provide funding for it.

Mr. Don Foster

I have a sense of deja vu. It is perfectly possible to debate who said what to whom and when and where, and to say that the issue was not well handled. Equally, we could have a debate in which we say that we want to get on and put the solution in place as quickly as possible.

We have been over the ground many times, and I would be much more interested to hear whether the hon. Gentleman believed that all would have been well had the then Secretary of State done nothing whatever. Alternatively, does the Conservative party have a solution to what was undoubtedly a problem that had to be solved one way or another? The then Secretary of State at least had a solution, and I would love to hear what the hon. Gentleman's was.

Chris Grayling

The hon. Gentleman will be aware that I have been doing hon. Members the courtesy of responding to questions that they have raised. I mentioned that I intended to go on to some of the substantive issues that face the industry, and I shall do so now. In a debate on the report, it is important to explain some of the context for the divisions in the Committee and the publication of the minority report.

The consequences of administration and Government decisions on passenger rail franchising are proving extremely serious for the industry, and I want to set out some of the reasons why. Most immediately, the factor that has not been adequately taken into account in consideration of the industry's situation is capacity. Many of the practical problems on the network are caused by the fact that there is simply no space. During the past five to seven years, there has been almost unprecedented growth in the number of people using the railways, to the extent that there are more passengers today than there were before the Beeching cuts, with a network at a fraction of the size.

We see the consequence of that in the performance figures. Last week, 70 per cent. of services by South West Trains arrived on time. As a regular user of South West Trains, I realise how full the trains are on that network and how easily the timetable gets out of kilter for hours if something simple goes wrong. The capacity problem is at the heart of the rail challenge that the Government face. Unless that is tackled, we will not see the improvements that the rail network needs.

A tragic consequence of that background, and the reason for my main criticism of administration, has been the confrontational environment that it created. The industry should have worked together to deal with its problems, reshaping by consensus not by confrontation in the courts, if reshaping was truly necessary to deliver improvements. Another consequence has been a delay in the major projects needed to ease the capacity problems.

I shall give a specific example. South Central operates from Victoria to Brighton, and has other routes that head down through my area, among others. South Central has a project on the books to upgrade its line, to create new flyovers and to do station improvements for new loops that would greatly improve the capacity problems on its network. When Railtrack was put into administration, it had a team of 200 people on that project, working towards the creation of a special purpose vehicle that could make it a reality. That team has been disbanded. A skeleton staff of 12 people are now working on the project, which will take years to revive. The delay has happened and the team has been disbanded because there is nobody to work with it on the infrastructure side in the long term.

The Government are causing problems for the future development of the network by over-reliance on organisations that are concepts and not realities. The first is Network Rail. I wish Network Rail well, because it is the only option that the Government have left us with. However, it is a shell company with a small group of people, mostly financiers, operating out of an office in Tottenham Court road. It has no expertise in transforming railways. We hope that it will deliver and succeed. However, there is no reason to believe that it has the ability to deliver something that Railtrack could not.

There are fundamental questions about Network Rail. Who carries the risk? What happens if something goes wrong? Tom Winsor has said repeatedly that shareholders bring a cushion against things going wrong, because if they do, the shareholders lose their money. What happens if something goes wrong in Network Rail, such as major cost overruns or major under-performance in the business? Who carries the can and picks up the cost? The inescapable answer is the Government. There is nobody else. Who is accountable and responsible for Network Rail?

I have found it particularly frustrating in recent weeks asking the Department questions about Network Rail. It is a company that has been established by the Strategic Rail Authority, and its senior directors were recruited, and paid, by the SRA, but the Government continue to behave as though it were a stand-alone company for which they have no responsibility. If something goes wrong, who is accountable for Network Rail? We have no answer. The Government are clear that they are not, but I am far from clear that they can shirk that responsibility.

Mr. Foster

I happen to agree with the hon. Gentleman's concerns. However, I would go further. We have the ludicrous situation in which the SRA is meant to make recommendations to the Secretary of State for the future while separately, but borne by the SRA, another company is making its recommendations. The Secretary of State is meant to choose between the various bids, yet we know that he has already made up his mind. A great deal of money is being wasted in the production of alternative bids that will fail because the new body will succeed.

Chris Grayling

The Government have been lucky in that those who were preparing alternative bids and ideas have not banged more strongly on their door, especially since the developments in March.

The other concept area is that of special purpose vehicles, to which the hon. Member for Stoke-on-Trent, South referred. They are untried, untested and unestablished. We are months, if not years, away from the establishment of a special purpose vehicle that can start to deliver improvements on the network. However, I have spoken to senior people in the rail industry who have real doubts that those vehicles can be established and can work.

There are fundamental financial issues about special purpose vehicles. First, the Government depend almost entirely on such vehicles to deliver the 10-year plan for transport. We recently heard in evidence to the Select Committee from the previous Secretary of State that there is only some £4.5 billion of uncommitted cash in the 10-year plan from the public sector for investment in the railways. The rest is for routine subsidy or specific regular routine maintenance grants for Railtrack, which include only the west coast main line, and money for the channel tunnel rail link or for paying debt—the interest on the private sector contribution. So, of the £33 billion of public finance, there is only £4.5 billion spare. That means that the £34.5 billion of private sector finance in the 10-year plan for the railways has to take up most of the slack in delivering improvements.

That is where the special purpose vehicles must play a vital role. But how will that work? One can set up a special purpose vehicle, which is effectively a public- private partnership scheme, to make station improvements or to modernise the east coast main line, but ultimately a separate company cannot own the east coast main line in isolation from the rest of the network, because it is not a separate, stand-alone entity.

Even if we find contractors who will put together a financial package and take on the modernisation of the east coast main line, at the end of the process, the line must be transferred back to Network Rail in some way. Assuming that the people who had built the line would want to be paid back, Network Rail would have to buy it back, either in cash up front or in long-term liabilities.

Out of the £34.5 billion, £7 billion or so is allocated for rolling stock investment and will come through the leasing companies, but the other £25 billion to £27 billion is infrastructure investment that will be channelled through special purpose vehicles. At the end of the process, that investment will have to be bought back by Network Rail.

The successor is a company limited by guarantee, owned by we know not who, controlled by we know not who, that needs to start off by raising £9 billion of debt in the City and then needs to buy £25 billion of assets from various special purpose vehicles during the next 10 years. The basis for that is a business that, as Railtrack, had a turnover of £2.3 billion. Does anyone understand how that arithmetic will work? Does anyone think it credible for a company to have debts that are 10 times larger than its income? I do not believe that the current model will or can work. The problem is that although special purpose vehicles can deliver some of the improvements needed they can provide only a fraction of what is necessary. The 10-year plan is stuck in a siding and I do not understand how the current financial approach will get it out.

It is important to remember that the report began as one into passenger rail franchising, but circumstances on the networks steered us down the infrastructure side. We were, and we should still be, extremely critical of the introduction last summer of short-term franchise renewal—the two-year extension to the GNER franchise is an example. The Government have defended the practice using the example of the Midland Mainline two-year franchise extension, saying that it has not affected investment. However, that is disingenuous, because the Midland Mainline extension was a two-year extension to a closing date far in the future. We effectively turned a franchise with five years remaining into one with seven years remaining. GNER is not like that. The extension was for two years and it is a short-term measure.

We know, because we took evidence from the company, as my hon. Friend the Member for Vale of York (Miss McIntosh) said earlier, that GNER will not invest in rolling stock in the way that it had hoped and expected because of that short-term franchise extension. Common sense says that if somebody is given a two-year extension to a franchise, they will not rush out to make major investments in the network. The Government need to be careful before going down that path again and I hope that there will he no more such franchises.

We also need clarity about the number of franchises that we are to have. I believe that there were too many, although I temper that remark by saying that if we get rid of some of the smaller franchises, we might get rid of some of the more successful ones. The Chiltern franchise has done so well that one would not wish to replace it. However, there have been too many franchises. I was particularly concerned by the Government's decision to create a separate Wessex franchise and split the South West Trains franchise into two. I am delighted that the SRA is holding consultations on that proposal at the moment but I wish that the Government would draw that consultation quickly to a close and get on with a single franchise for the whole of the south-west.

The Government's actions over the past few months have exacerbated the industry's problems, which were undoubtedly there already. They are now creating a situation where projects are being delayed unnecessarily because of the hiatus in the industry. The danger now is that it will become impossible to deliver the 10-year plan, not just for financial reasons but in logistical terms. All those projects will be condensed into such a short period under the plan that it will be logistically impossible to build them all at once. It is a shame that our country cannot afford to do so, because we need to get things moving.

I urge the Government to get at least some of those much-needed projects under way. They must do what they can to ensure that Network Rail gets Railtrack out of administration quickly and to sort this mess out. If they do not, I fear that the Committee—in whatever guise it takes—will return to the issue in two or three years' time and come up with a report that makes the Government as uncomfortable as our recent reports have made them.

4 pm

Jane Griffiths (Reading, East)

Although I am not a member of the Transport Committee, I am pleased to have the chance to take part in this vital debate. Paragraph 71 of the conclusion to the Committee's report states: As the Prime Minister has said, there are two reasons why the problems with the railways have arisen. The first is related to privatisation which 'is generally accepted to be a disaster'… Secondly, there is the under-investment in the industry which went on for 'a considerable period'". We have heard much about the disaster of privatisation, the problems caused by the fragmentation of the railways and privatisation's destruction of the safety culture. I shall not repeat those arguments, but instead confine my remarks to issues that, while somewhat historical in nature, are none the less pertinent to the report.

In 1833, the Great Western Railway company was formed to build a railway from London to Bristol. Such moves were supported in Reading by public opinion and by the Liberal-supporting paper, the Mercury. It was opposed by the landed gentry, and the paper that was set up to support the Conservative cause, the Berkshire Chronicle. Despite strong support, the first Great Western Railways Bill was defeated in the House of Lords, but a second Bill, in 1835, was successful.

The line reached Maidenhead in 1838, but because of the difficulties caused by the construction of the Sonning cutting, it did not reach Reading until early 1840. On 24 March, just before the line opened, a freak whirlwind struck Reading: it drowned two fishermen in the River Thames and tore off a 4-ton section of the station roof, hurling a young man, Henry West, to his death. His colleagues erected a memorial to him in St. Laurence's churchyard in Reading. As an aside, I should mention that the whole episode often features in pub quizzes in Reading. I shall return later to the problems caused by high winds.

The expansion of the railways saw Reading connected to Newbury and Hungerford in 1847. In Basingstoke in 1848, the Great Western line linked up with the South Western line from London to Southampton. In 1849, Reading's South Eastern station opened on the line connecting Reading with Guildford and Reigate. In 1856, the completion of the line between Wokingham and Staines gave Reading a second link to London, at Waterloo.

That growth in the rail system was matched by growth in Reading, with the result that Huntley and Palmer biscuits were eaten all over the empire. That growth also allowed the seeds grown by Mr. Sutton at his Royal Berkshire Seed Establishment, which were widely known among British farmers, to be exported all over the world. The tin boxes of Huntley Boorne and Stevens were taken on the railways, and iron founding and brick and tile making all grew.

The great age of the railways stretched from the 1850s to the first world war. Very little investment took place during the war, and some people blame the subsequent state of the railways on that. To remove the duplication and waste of resources caused by the existence of more than 120 companies, the Railways Act 1921 created the big four companies. In his excellent book, "Broken Rails", Christian Wolmar describes the big four companies' unsuccessful attempt to achieve profitability, which in turn led to serious under-investment. The London and North Eastern Railway company paid no dividend to shareholders and chose to invest any moneys in the system, whereas GWR paid the highest dividends, and although some companies invested in the electrification of the heavily used southern commuter routes and in creating extra capacity on the east coast line, GWR undertook little electrification.

After the second world war, the railways again suffered from years of intensive use and under-investment. Contemporary accounts record that nationalisation was rushed, which resulted in as complex a management structure as privatisation created 50 years later. Furthermore, the Government paid over the odds: shareholders in the big four were paid £20 billion at current prices. It is interesting to compare that figure with the £2.5 billion received for Railtrack in 1996.

In the 1950s, a modernisation plan was drawn up to deal with predicted future losses by investing heavily to reduce costs—in particular, in mass electrification and the introduction of diesel trains on branch lines. That plan resulted in the electrification of the west coast main line and investment in new trains, but then the tap was turned off. Thereafter came the pro-roads Transport Minister, Ernest Marples—the man who started serious motorway building in this country and who, amazingly, owned a company that did very well out of the massive investment in new roads.

Mr. Marples employed Beeching, who proposed making massive cuts in the railway network. If Beeching's report had been implemented in full, there would remain only lines to the north-west, Glasgow, Edinburgh and south Wales, but the implementation of his report was patchy, with some profitable routes being axed and other loss-making and duplicated routes surviving.

Barbara Castle's Transport Act 1968 heralded some improvements. The 1970s saw the electrification of the east coast main line and the introduction of high-speed trains out of St. Pancras station and on the western region lines out of Paddington station. At the time, however, they were seen as a low-tech solution that would be replaced by the advanced passenger train. Although the 1980s saw massive fare increases, and the boom of the late 1980s saw passenger numbers increase, the advanced passenger train did not happen; and the recession of the early 1990s and the fall in the number of passengers led to privatisation.

We are now back at the conclusions of the Committee's report. In his review of the 50 years of state control of the railways, Christian Wolmar talks about the problems caused by stop-go investment, and adds: the biggest mistake of successive British governments has been the failure to think strategically and to develop the kind of grand plan whose success makes the British so envious when they travel on the French TGV system.

Huntley and Palmer, Suttons, Huntley Boorne and Stevens, the iron foundries and the brick and tile makers of Reading have gone, to be replaced by Microsoft, Oracle, WorldCom, Thames Water and Prudential. I have been into some historical depth to illustrate the lack of investment in the western region for most of the period since the first world war. Our railways, both private and state-controlled, have been given promises of investment that, by and large, have not materialised.

The western region has not been electrified, except for the stretch used by the Heathrow express. One of the reasons that I was given for the lack of electrification was that Cornwall was too windy for the overhead wires, which would be blown down by Cornish winds. I am grateful to my constituent, Dr. John Missenden, for telling me that when the same overhead wire system was sold to China in the 1980s, it was described as typhoon proof. Reading has had only one whirlwind, and I am sure that the overhead wire system could have stood up to it.

To that extent, I wholeheartedly support the recommendation of the Select Committee report at paragraph 62: that the Strate gic Rail Authority should implement a programme of electrification without delay. It could do no better than start with the western region. However, the Government's response to that recommendation was: The SRA does not believe that electrification is a current priority for investment…The SRA believes that the benefits of electrification are not as clear cut as they were twenty or thirty years ago. It is…expensive to provide both the necessary infrastructure and the high standard of reliable power supplies which modern electric trains require. There is also now no significant fuel cost saving between the use of diesel and electricity. Similar performance characteristics and noise levels between modern electric and diesel powered trains mean that most passengers can no longer discern any difference between them. I am sure that that is all true. However, the Government's response makes no mention of the undoubted environmental benefits of electrification.

At Reading station, we have a capacity bottleneck that Railtrack's network management statements said was one of 10 worst in the country. We have had more than a decade of promises from Crossrail of a line from Reading to the east of London, passing under London en route, but it is not built and we still face reports on its viability and consultations on what its route should be. The west coast main line is receiving an upgrade to its upgrade, and planning is being don for the upgrade of the east coast line upgrade. The strategic plan for the Strategic Rail Authority was finally published at the beginning of the year, and the Select Committee's report details the delay and disappointment. Yet the same plan timetabled any work to modernise or upgrade the western region for the very end of the 10-year period, offering jam tomorrow, yet again.

There is now a route from Heathrow to Paddington, but there are no plans for a route to link with the western region and only a half-baked plan to link up with the railway somewhere south-west of the airport. Reading is at the crossroads of north-south routes and routes between London and the west. Movements on those routes cause conflict at Reading station, which has reduced its capacity. Reading borough council has been talking to developers about redeveloping the area around the station, which could pay for some of the other improvements that I have mentioned, but what chance is there that those who currently run the railways would be interested in working together on such improvements? As much chance as there has been for the past 50 years of electrifying the western region.

This morning, I received a document from the Railway Forum entitled "Building the Railway for the Future: Update 2002". Based on the work of the distinguished transport economist, Dr. Rana Roy, it states that estimates of potential growth contained in the 10-year transport plan are understated. The original document, "Building the Railway for the Future" said that the estimates of railway growth were underestimates, as a result of congestion charging being introduced sooner than expected and because of higher than estimated growth—and there will be even higher growth in future. It is important that railways develop to accommodate that growth, rather than rapidly increase prices to choke it, causing even greater environmental damage as people turn to their cars. There is another debate to be had about how price increases have disadvantaged public transport users by comparison with car owners during the past 25 years.

Railway safety is another important issue. We must be careful that, as a result of a few high-profile accidents, we do not focus too much on spending all investment on railway safety rather than on improvements to the system.

Mr. Simon Thomas (Ceredigion)

Does the hon. Lady share my concern about the lack of investment to provide extra coaches on popular services that are heavily used, particularly those in rural areas, where there might be a service only every two hours? There seems to be a deliberate attempt to minimise the amount of space available in order to choke demand; meanwhile, as she mentioned, investment is made in safety measures, which do not have the same beneficial effects of encouraging people to get out of their cars and travel by rail.

Jane Griffiths

I share the hon. Gentleman's concern about lack of progress on increasing the number of coaches, but I do not agree that it is a deliberate ploy. I simply want to warn against such a strategy, which would fail regardless of its effect on the railway system.

Since privatisation, there have been eight deaths a year as a result of train accidents. That compares with an average of 3,400 deaths a year on the roads. It says something about our society that we seem to be more relaxed about deaths on the roads.

Mr. Don Foster

The hon. Lady raises an important point by comparing safety on roads and on rail. Is she aware that new statistics have been published today which show that there has been a 1 per cent. increase in road deaths in the past 12 months? One per cent. might appear a small increase, but it represents about 34 additional deaths—far more than the total number in any year on the railways. That illustrates her point even more forcefully.

Jane Griffiths

The hon. Gentleman is absolutely right.

The railway service from Reading to London is fine. Sufficient trains come from Wales and the west country that passengers do not need to use a timetable: they just turn up at Reading station and catch a train within 10 or 15 minutes. Journeys elsewhere are a different matter. A member of my family who lives in Cornwall needs to travel regularly to Bristol: she leaves three hours leeway to ensure that she arrives at meetings in Bristol on time.

I talked about the past and present in relation to the report, but I shall conclude by talking about the future into which the report must lead us. There should be an electrified western region, from Reading to the southwest and Wales; Crossrail should finally be introduced with Reading at its western end, offering a link from Reading and the west straight through to Stratford and the channel tunnel rail services; and there should be a link to Heathrow airport on to the western region from the west. That would make it possible to have an airport and channel tunnel check-in at Reading station as they have on similar stations on Swissrail, which allow luggage to be checked in and dealt with before reaching the international plane or train. Reading station should he rebuilt to increase capacity as part of the redevelopment of the station area.

I talked earlier about the important part that railways have played in Reading's growth. It has become more than a sleepy market town as a result of its place on the transport network; it is at the centre of a region that is helping this country's economy to expand, and it is important for Reading, the region around it and the whole country that there is a modern and efficient rail network. We will not have such a network if we repeat the mistakes of the last century and fail to invest. I have set out a vision for the future of rail, but it is up to the Government, the Strategic Rail Authority and the companies to implement that vision. I call upon them not to fail in that challenge and not to allow the under-investment that characterised the last century.

4.16 pm

Mr. Simon Thomas (Ceredigion)

On behalf of Plaid Cymru and the Scottish National party, I welcome the Committee's excellent report. We do not have a minority view on it, as we do not have a place on the Committee—indeed, we have no place on any departmental Committee, but that is a separate complaint. The report shows the stamp of the Chair, who is to be congratulated on her sterling work in the past few months in keeping the issue alive and at the top of the political agenda. It is a long time since railways dominated the political agenda as they do now. I would say that some of the responsibility for that lies with the former Secretary of State for Transport, the right hon. Member for Tyneside, North (Mr. Byers), who dug some holes that he did not have to dig, but some of it certainly lies with the hon. Member for Crewe and Nantwich (Mrs. Dunwoody). She should be congratulated on that, and the Committee as a whole should be congratulated on the report.

I intend to address three key aspects of the report that affect Wales and, to an extent, Scotland: first, the delays in the franchising procedure—Wales and the borders will form one franchise area for the first time, which is a huge step forward but the delay is of great concern; secondly, the placing of Railtrack in administration; and thirdly, the nature and some of the limitations of the 10-year plan. I shall start with the 10-year plan and the underfunding that can clearly be seen in it, especially in the light of what we want to achieve in Wales.

I was interested to hear the hon. Member for Reading, East (Jane Griffiths) outline her plans, which were not in the least ambitious. My ambitions for Wales are even smaller and more minor than her plans for Reading. The Minister knows what those plans are, but they are as far from fulfilment as they were two years ago, and almost as far from fulfilment as the hon. Lady's.

The 10-year transport plan allows for £60 billion to be spent on the railways by 2010, of which half will come from public funds. We have questions about exactly how the rest will come from the private sector, but that subject has been discussed already. The Committee's report makes it clear that the Government must give a commitment to that public funding. If long-term funding does not come from the current Government or future Governments, the switch to roads will continue, there will be an increase in road traffic and a failure to deliver on the Deputy Prime Minister's promise. A 1 per cent. increase in road deaths can be linked to the increase in road traffic, although that is somewhat decoupled from the growth in gross domestic product.

In the Welsh context, that £60 billion amounts to only £20 million a year, whereas a rough calculation based on the Barnett formula and the needs of the Welsh railways gives us a figure of about £300 million a year. That is backed up by work from Professor Stuart Cole from the Wales Transport Research Centre. Wales receives about a fifteenth of what it needs. The Minister was challenged on that when he gave evidence to the Select Committee. My hon. Friend the Member for East Carmarthen and Dinefwr (Adam Price) helpfully asked him whether Wales was being short-changed. His answer—"Yes"—was even more helpful. It is now clear that it is less a matter of short change than of no change. What will the Minister do to rectify the problem? We have some short- term ability to rectify it, mainly because the National Assembly is plugging the gap with its own funds even though it has no responsibility for rail, but in the long term—over the 10 years of the plan—there is a huge funding gap for the railways in Wales.

My constituency offers a prime example of how the problems are affecting Wales in general. The National Assembly has been working with the Strategic Rail Authority and the companies to agree a £6.5 million upgrade of the line from Shrewsbury to Aberystwyth. All we want is an hourly service, the reinstatement of some sidings that were removed in the 1980s so that trains could pass on a single track and to save costs, and an upgrade of the Dovey junction. I do not know if anyone has been to Dovey junction, but it must be the loneliest junction in the world. If anyone got out there, they could not leave without another train coming to pick them up, because it lies in the middle of a marsh. Nevertheless, it is vital as it is where the line from Aberystwyth diverges up to Pwllheli and the north Wales coast. It is a hugely important line for tourists, and for linking local communities in a rural area.

We will not be short of the £6.5 million—at least, no one says that finding it will be a problem. The National Assembly put up £2.5 million of its own money from a transport grant, and the SRA earmarked £4 million. However, the plan was put on hold just before Railtrack went into administration, and it is now no further forward. I understand that that is to do with engineers and the Railtrack's inability to undertake the work. I am talking to the bidders for the Wales and borders franchise about whether they are prepared to take on the work as part of the bidding process, as there is no reason why the company that takes over the franchise cannot undertake the part of the work for which Railtrack was responsible and use the money available to employ engineers from other private companies.

Small but significant regional upgrades like the ones in my constituency are being overlooked in the planned, but not yet delivered, massive investment in the south-east of England and in schemes such as the train protection warning system. I hope that the companies are amenable to them in principle, as the SRA was when I talked to it. I hope that the Minister will take up the proposal and use some of his good offices to whisper a suggestion in the right quarters. If that were to come off, many people in mid-Wales and in the National Assembly would see that the relationship between his Department and the Assembly has become better in recent months, even though it is due in part to the Railtrack fiasco.

The process of franchising in Wales is currently a minefield. Eight pre-qualified parties want to run the Wales and borders franchise. I believe that one recently withdrew—the Minister might be able to say something about that—but there were certainly eight in the initial announcement. The parties have been disgruntled by the way in which the SRA has handled aspects of the franchise process. The first guide for the franchise was produced only after the bidders had pre-qualified—they pre-qualified for a process without knowing what the guidelines for it were, which is a curious approach. The companies now within the franchising process complain that they do not have sufficient insight into the criteria used to measure the selection of the final company, despite the fact that the draft franchising statement of June 2001 said that all bidders…must be aware of the criteria upon which their bids are being assessed. Clearly, we have another hole.

A final problem is that the aspirations of people in Wales have been raised. The National Assembly has its own transport infrastructure projects and ideas involving buses, road transport and community transport. The railways are not devolved, but Welsh people's expectations about what can he achieved by railways have been raised. The companies applying for the Wales and borders franchise know that those aspirations cannot be met by the present subsidy for the Welsh franchise.

We were initially promised some redress for the years of underfunding in Welsh railways, but it is now clear from the facts ascertained so far and from the evidence given to the Select Committee that no significant move in that direction will be forthcoming. The Government have recently significantly increased investment in railway infrastructure of the UK as a whole, but if we focus on the regions and nations of the UK, glaring gaps emerge—gaps that could create huge problems in future.

Emergency cuts were made in Wales and the borders when Aberystwyth and Wrexham services took over the shadow franchise last winter. Organisations such as the Shrewsbury and Aberystwyth Rail Passengers Association and I were told that cuts were necessary to make the timetable work, and we had to accept that. What is really annoying is those cuts have now been removed from the core franchise. In other words, the core franchise is now what is was minus the cuts, yet the cuts were made on an ad hoc, temporary basis. We have already lost, if not a whole arm, at least a hand from the Welsh railways, a loss that will affect their reach to Pwllheli and Wrexham.

Significant difficulties remain with the Wales and borders franchise. They all revolve around the precise sum of money made available within the franchise area for Wales. The Government and the Strategic Rail Authority seem to have made a reasonable proposal. The major railways infrastructure is based in the southeast of England, where 70 per cent. of rail journeys take place, so the major investment is focused there; but we will miss a trick if we fail to remember the small and significant improvements that could be made elsewhere in the United Kingdom which could enhance the number of journeys and the comfort of passengers. The mid-Wales lines, which have two carriages, are dreadfully overused in the summer, and at weekends, when students go back and forth from the midlands to Aberystwyth, the services are dreadfully overused. The handling of franchising in Wales is confusing and is unlikely to deliver even the minimum aspirations of people in Wales, which were raised following the refranchisement process and the headline figures of fairly massive investment at UK level.

I conclude by dealing with the business of administration and Network Rail. Both my party and the Scottish National party fought the last election on the principle that Railtrack should be renationalised. We felt that it was the safest, quickest and cleanest option. Because the stock in Railtrack had fallen, it was reasonable for the Government to buy it back until it had a 51 per cent. controlling interest in shares. If that had been done, compensation would not have been such a burning issue. The Government could have reassumed control of Railtrack without the mess that the administration created. Bob Kiley, who is now responsible for the London underground, used that model for the New York subway. It would have given us the necessary public ownership without completely alienating the private sector, which is a danger in the current handling of the matter. I support the need for Railtrack to come back in to the public fold, but I question whether Network Rail is the correct vehicle with which to achieve that.

The speeches from the hon. Members for Stoke-on-Trent, South (Mr. Stevenson) and for Epsom and Ewell (Chris Grayling) are relevant to the replacement for Railtrack, Network Rail. The hon. Member for Epsom and Ewell will recall that Glas Cymru—Welsh Water—was used as the model. The Glas Cymru model is interesting and would bear examination by hon. Members from outside Wales. There is no question that profit has been taken out of Welsh Water; there is still profit, but it is now being ploughed back into the company. It does not go to shareholders, which is a positive move.

On the question of accountability, which was touched on by the hon. Member for Stoke-on-Trent, South, there is no element of democratic or public accountability within Glas Cymru. It was promised that Glas Cymru would draw members from all sections of Welsh society and that the executive and non-executive directors and the board of management would reflect the interests in Welsh society. However, the old officers and guard—I should probably not use the word "hacks"—of Hyder have turned up again. There has been no expansion of public accountability or any element of public ownership in Glas Cymru.

Glas Cymru seems to be working well at the moment, which pleases me. It is a different way of trying to deliver private sector control over utilities, but I would not confuse what Glas Cymru is doing with public ownership or control. Accountability has not been resolved with Glas Cymru or in the proposals for Network Rail.

Chris Grayling

I draw the hon. Gentleman's attention to another difference between Glas Cymru and Network Rail. He rightly referred to Glas Cymru's ability to plough money back into the business. However, economic ups and downs mean that railway revenues rise and fall, while water company revenues, because they are regulated, tend to be reasonably static and reliable. Therefore the weakness in the Network Rail model is that if there is a major downturn and revenues fall significantly, there is no cushion to absorb short-term financial problems.

Mr. Thomas

I accept that point, and it is notable that Glas Cymru got its bonds in the City on the basis of the regulator's comments about its prices over the next five years. The quinquennial review by Ofwat gave Glas Cymru its collateral to get the bonds in the City. Network Rail will not be able to do that in the same way because of the recent history of administration and the differing nature of income streams that the hon. Gentleman pointed out.

I hope that Network Rail succeeds and that there will be an element of public accountability in the new body. However, the Minister should take the opportunity today to say how the members of Network Rail will he appointed. He must answer the key questions: who will appoint the members, and who will then appoint the executive and non-executive directors? Any shadow of public accountability and ownership rests on those questions, and if they cannot be answered satisfactorily, the euphoria of several months ago about the idea that administration was taking Railtrack into public ownership will dissipate. We will be left with the fact that Network Rail is a private sector company in a different form, which should concern Labour Members.

A key lesson that we picked out from both the Committee's report and the recent experiences of railway infrastructure in Wales is the need for stronger devolutionary procedures. I will not argue for the immediate devolution to the National Assembly of responsibility for railways in Wales, but that is my party's position, and the Scottish National party holds the same views about railways in Scotland. However, I believe that the role of the representatives on the SRA needs to be strengthened. A member is appointed to represent Wales and a member is appointed to represent Scotland, although they have a slightly different remit in legislation. The National Assembly must be able to discuss the needs of Wales with that member, and able if necessary to issue some form of instruction about how they should be argued. That is almost the case in Scotland, although the position could be beefed up a little.

At present, we have representation without a voice. It is representation selected by the Department—there is no real interface to allow the National Assembly's views to be voiced at a senior level in the SRA. That must change because the Assembly is responsible for all other aspects of transport in Wales. If we want an integrated transport system, we must get better collaboration in Wales. My personal way of achieving that would be to have a passenger transport authority for Wales, but that is some way down the line. In the meantime, I hope that we will have a stronger representational role for Wales on the SRA.

I hope that the Minister can tell us how the franchise can be improved in Wales, and that there will be some extra money for that, although I might be hoping for too much. I hope that he will also listen to the concerns of organisations such as the Shrewsbury to Aberystwyth Rail Passengers Association about the delays in some of the smaller infrastructure projects. There is no financial barrier to those projects going ahead, only the barrier of Railtrack's administrative chaos. The Government are now responsible for Railtrack, and as the sole funder of Network Rail they will de facto be responsible for that body. They are paying the money and they must start calling the shots.

4.36 pm

Mr. Mark Lazarowicz (Edinburgh, North and Leith)

I, too, am grateful for the opportunity to participate in this debate. As my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) said, the report goes into the issues in considerable depth. As a non-member of the Committee, I took the time to read the report and most of the evidence and the appendices. It is an extensive report. Tempting though it is to add my two ha'porth on the wider issues, particularly after the interesting speeches that we have heard today, I hope that members of the Select Committee will not regard is as a discourtesy if I restrict my comments to local issues. Indeed, I expect they would prefer it. Those local issues exemplify some of the wider problems that have been the subject of the debate. I hope that the Minister can respond to them either today or in writing at a later stage.

My most recent local experience in this matter comes from the two years that I spent immediately prior to the last general election as the executive member responsible for transport on Edinburgh city council. In that capacity I was heavily involved in the council's efforts to extend rail services in and around Edinburgh. That experience showed how the structure—or perhaps one should say the chaos—left by the Conservative Government's privatisation made it difficult to improve our local network. It is illuminating to consider how fragmentation such as my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) described affects what one can do to improve local transport services.

I was interested in the comments of the hon. Member for Ceredigion (Mr. Thomas), with whom I often disagree. Many of his accounts of the difficulty of taking forward local projects match my own experience. That is the result of fragmentation. It happens in rural Wales, urban Scotland and elsewhere. It shows how the rail network is suffering from the consequences of privatisation by the Conservative Government.

There are two local examples to which I should like to refer. The first is the Edinburgh crossrail project; one area in which the rail industry has not been extravagant is in choosing names for urban railway projects. No city in the UK seems without its crossrail project, but no matter. The development phase of that project began about seven years ago. Shortly afterwards, the shadow Strategic Rail Authority was established and funding made available. To cut a long story short, an essentially simple project to build two new single-platform stations to take passenger rail services on a stretch of line just over a mile long that was already fully functional for freight services became bogged down in a mire of negotiations with Scotrail and Railtrack. The prices initially demanded by the signalling contractor—signalling was a major element of the project—were, in the view of council officials, utterly outrageous and possible only because there was only one supplier in a privatised market. Without competition, it could demand the price it wanted. The delay resulted in the project being completed last month, about two years late. I am glad to say that it is operating successfully.

The second local example is the campaign to open a railway station to serve Edinburgh Park, a major and prestigious office quarter in west Edinburgh, which is the fourth biggest centre of office employment in Scotland, behind Glasgow, Edinburgh city centre and Aberdeen. Road access to the area is heavily congested for much of the day, but the Edinburgh-Glasgow main line runs right through it. Many of those who work in the office quarter would much prefer a speedy rail journey to work. The obvious solution was for the developers and the city council to open a station, and from the beginning they provided joint funding of around £4 million for that purpose. However, the effort of trying to get all the parties involved moving to open the station was enough to drive a person up the wall. It was one of my biggest headaches when I had responsibility for that area of activity on the city council.

What should have been a simple exercise of building two platforms on each side of an existing passenger rail route was, again, bogged down in a mire of negotiations. Railtrack made demands for new loop lines to be built, which would have more than doubled the cost. Those demands were subsequently withdrawn and then raised again. Scotrail would not agree to stop its main Edinburgh-Glasgow trains at the new station, denying it much potential benefit. Most recently, Railtrack raised the issue of additional compensation, because it was concerned that stopping trains at the new station would cause delays to existing services, and it claimed that that would make it liable to fines from the SRA for failure to meet performance targets. My constituents, along with many others who struggle with daily traffic jams to get into Edinburgh Park, find it difficult to understand how a new station and new services that would take many people off the roads and on to the rail network, thereby creating higher earnings for the rail operators, should attract a penalty for failure to perform. The system should surely encourage rather than discourage success.

The long and short of the matter is that a date has still not been set for work to begin on that project. It is now four years late, and we are seriously worried that potential jobs in the area could be lost because of traffic congestion. I was pleased that last week the Minister responsible for transport in the Scottish Executive intervened to try to break the logjam, but given the involvement of the Strategic Rail Authority and Railtrack, the matter is also the responsibility of Westminster. I urge the Minister to help his counterpart in the Scottish Parliament to sort out the mess. Will he give a commitment at least to consider what can be done to resolve the delay?

My purpose in highlighting those two local examples at some length is to show that, if relatively small-scale projects involving only three stations can get bogged down in the bureaucracy of the post-privatisation railway network, it is not surprising that much bigger schemes, such as the west coast main line, have run into so much difficulty. Those examples certainly emphasise the need to simplify the structure of the rail network, for which I think everyone is now calling, even though their solutions may differ.

My local experience does not only show what fragmentation means for the rail system. A knock-on effect of the delays to which I have referred is that other projects linked to the new stations have been knocked back. Other proposals to develop the bus system have been affected by delays in opening rail stations, so the knock-on effects go beyond the rail system.

I am perhaps more positive than some members of the Select Committee—I may be doing them an injustice—about the signs of strong leadership now coming from the Strategic Rail Authority. The excellent publication from the Railway Forum, which we all received this morning, says that in its view the Government's 10-year plan and the SRA strategic plan have laid the essential foundations for a long-term view of Britain's railway needs as part of an integrated transport solution. I endorse that conclusion. Simplification and decisive leadership by management and politicians are required, and the SRA plan provides the basis for such a change.

I also welcome the SRA's intention to simplify the franchise system. I fully endorse the Select Committee's support for longer-term franchises. I urge the Government to consider giving much more positive backing for longer-term franchises than seems to be the case at the moment.

My constituents are particularly interested in the east coast main line franchise. I accept that, in the circumstances, the two-year short-term extension agreed last year was right. It gives us a breathing space to get the terms right for a long-term franchise of 15 or 20 years, which could bring substantial reductions in journey times and improvements in reliability and frequency that will benefit not only Edinburgh but towns and cities further south and further north.

I was interested in the Select Committee's conclusion that consideration should be given to building new railway lines alongside existing routes because of the difficulty of upgrading routes already in operation. I can see the strength of that argument, but I suggest that the logic be taken further.

I urge the Government to give their backing as soon as possible to the idea of an entirely new north-south high-speed line—a TGV-type line—linking London, the midlands, the north of England and central Scotland. Such a line would not be an alternative to upgrading the east and west coast main lines, as some opponents of the proposal fear. In fact, it would complement those lines. Yes, the idea is ambitious—perhaps even more so than the agenda proposed by my hon. Friend the Member for Reading, East (Jane Griffiths), who has now left the Chamber—but it is attracting growing support from the industry, commentators and hon. Members. The early-day motion that I tabled on the topic earlier this year now has the backing of some 69 MPs.

When I called for that new line, some people looked at me as if I was bonkers for suggesting something so ambitious, but perhaps that reflects the poverty of ambition that we have had for our rail network over generations. What would be the norm in other countries in Europe and Asia does not seem to be easily understood and accepted in this country. To give such a proposal the green light would be a good idea for improving journey times, helping economic development, releasing capacity for freight elsewhere on the network and relieving pressure on roads and airports. It would also be a massive vote of confidence in the future of the rail network in this country.

4.49 pm

Mr. Don Foster (Bath)

We have had a fascinating debate, and I begin by doing what at least one other hon. Member has done and publicly pass on my best wishes to the new Secretary of State. The debate shows the difficult job ahead of him and the various bodies that serve him.

Like many other hon. Members, I congratulate not only the Chair of the Select Committee, the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), but its members on a helpful and informative report. Although it did not have all-party support this time, it is interesting to note that the minority report refers to only a small aspect of one of the issues, and I take it that there is widespread support for the vast majority of the report. I congratulate the hon. Lady on the achievement of some notable successes. As she rightly said, the Committee produced more reports than any other Committee and, more importantly, produced extremely helpful and provocative reports that have praised the Government when they have done well and made tough statements when they have got it wrong.

I am delighted to follow the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz), because both he and the hon. Member for Reading, East (Jane Griffiths) helped to provide an interesting counterpoint and a context to the debate. By giving her historical perspective of the railways, the hon. Lady rightly reminded us that problems and developments on our railways have not started only recently. She was also right to refer to the underlying cause of the current problems, which was the failure of Governments of all political persuasions, including the Liberal Governments at the end of the 19th century as well as Labour and Conservative Governments, to invest adequately in our railway system. Separately and more recently, the disastrous privatisation of the railways led to the fragmentation of our railway system and the huge difficulties that that has created. Many hon. Members commented on that, but the hon. Member for Edinburgh, North and Leith did so most effectively.

I was delighted that several hon. Members made reference to safety on our railways, which must be our No. 1 priority in anything that is done in the future. However, as others pointed out, we must continue to stress that, comparatively speaking, our railways are a safe form of transport. As I said in an intervention on the hon. Member for Reading, East, the 1 per cent. increase in road deaths in the past 12 months represents more deaths than occurred on the railways during the same period.

The hon. Member for Vale of York (Miss McIntosh) spent much of her contribution discussing the alternative report that was published by the Conservatives and focused on Railtrack. I respect their concerns about some aspects of what has happened since Railtrack was put into administration. We made it clear that we supported the Secretary of State's move, and pointed to the fact that we recommended it many months before he did it. Despite that, we have subsequently criticised how the move was handled and the delays in resolving problems. The hon. Lady and her hon. Friends are right to point to legitimate concerns about how the issue was dealt with, but I do not believe that the decision was wrong in principle merely because of subsequent difficulties.

What matters now is how quickly we get Railtrack out of administration. Answers on that from the Minister would be helpful. It was somewhat disappointing that all that the Government were prepared to say on the subject in their response to the excellent report of the Select Committee was: We share their hope that the period of Administration will be as short as possible. That is not good enough. By now, the Government must surely be getting some feel for when the period will end, yet we understand that there are still difficulties ahead, as I alluded to in my intervention on the hon. Member for Epsom and Ewell (Chris Grayling).

It is worth remembering that the legislation that allowed the then Secretary of State to put Railtrack into administration required that the administrators develop a solution in the best interests of the shareholders. The Secretary of State is rightly trying to find a solution in the best interests of the public, especially the travelling public. The legislation creates a conflict, and the Secretary of State will have to find a way through that legal quagmire before he can announce how we will move forward.

It will also be worrying if we continue to have a delay, with Railtrack staying in administration. As the Government made clear on page 9 of their response to the Committee's report, their main concern is getting Railtrack out of administration, which means leaving any structural change for consideration until a successor company is in place". The Government admit clearly that all their interests are focused in one direction—sorting out of the mess of Railtrack—which means that everything else will be put on hold. I strongly urge the Government to act as quickly as possible.

In a compelling speech, the hon. Member for Stoke-on-Trent, South (Mr. Stevenson) talked about fragmentation, which I agree has caused great difficulty in our railway system. He also mentioned his concerns about the profit motive, many of which I share. I do not necessarily concur with his conclusion, although I was increasingly convinced as he spoke. There is no doubt in my mind that the solution to the Railtrack problem must include in the final agreement a clear specification that the role of the new body—Network Rail, or whatever it is called—must be in the public interest. I hope that that will appear clearly in the documentation.

The hon. Gentleman may rightly be concerned about profit motive in our railways, but he must not be too confident that his views are widely shared by the Government whom he supports. I have referred before to the document produced by the Department of Trade and Industry and the Foreign and Commonwealth Office "The UK Railway Sector Group—Releasing the Power of Rail", in which a Labour Government extol the virtue of the profit motive in our railways. For example, it states: The whole structure has been underpinned by intense competition for performance based contracts to drive down costs and guarantee results". As we know, all the evidence now shows that that is not the case.

The document goes on to boast about privatisation. The hon. Member for Epsom and Ewell was right to say that not everyone in the Government disagreed with the Conservative privatisation. The document states: Privatisation has also opened the British railway market to competitive forces. There are now 25 train operating companies, instead of just one. These not only compete with each other for passengers; they seek out the best offers from railway suppliers and consultants. Suppliers have emerged as stronger, leaner organisations intensely conscious of the need to strike deals. Everything must now be justified in business, not just engineering terms. If the hon. Member for Stoke-on-Trent, South has not already seen the document, he should read on, because it gets worse.

The hon. Member for Epsom and Ewell gave us the benefit of his views on Railtrack and those expressed in the minority report that was published by the Conservatives. He went on to talk about the crucial issue of capacity. He is absolutely right to say that we have a real capacity problem on our railways that must be addressed. Several hon. Members rightly referred to the excellent document that we received today from the Railway Forum. That document makes matters absolutely clear. The letter that accompanied it states that the 10-year plan growth targets have not been updated, even though it now appears that there will be a more rapid introduction of congestion charging and road pricing, the latter initially for road haulage by 2006, than was previously envisaged. Referring to Dr. Rana Roy's updated work, it states that he reaffirms that underlying growth in demand for rail travel remains significantly above the 10-year target figures but the capacity constraints have every prospect of choking off this demand.

The Minister will be aware that, partly as a result of the Select Committee's excellent report on the 10-year plan, there have been many comments to the effect that the Government intend to revise the plan. They would be right to do so, but it would be helpful if the Minister were to tell the House whether the targets in the plan are to be revised. If they are, and assuming that they would be revised upwards, what will be done about the capacity issue?

The Government, in dealing with overcrowding on our trains, fail to gather any of the data that would help us to understand the nature of the problem. The PIXC system takes only a snapshot of a small area of the country and fails to give us any real indication of the level of overcrowding, yet we know from the SRA's customer satisfaction survey that it is estimated that 40 per cent. of our trains are overcrowded.

When the Government update the plan, it would be good if they also did something about the statement of policy on passenger rail franchising, which is the basis for the SRA's plan documents and the starting point for this debate and the Select Committee's report. In that document, the Government say that they expect eight different outputs from the franchising operation. Not one mention is made of fares, yet as hon. Members have rightly said there is a real problem with that. We are squeezing out the growing demand not only through lack of capacity but through ridiculously high fares that are not regulated as they should be.

I hope that the Government will start collecting data on fares and do something about them. Perhaps, as a start, they could examine the complete farce of the London area railcard. Even senior members of the Association of Train Operating Companies whom I talk to immediately acknowledge that what they have done with the railcard will do nothing to help the Government to meet their growth targets, and indeed will hinder them. I hope that that issue will be considered in more detail.

The hon. Member for Reading, East rightly referred to the Railway Forum document. I am glad that she did so, because if other hon. Members have not yet seen it, it deserves more exposure. The hon. Member for Ceredigion (Mr. Thomas) supported much of the report, but said that there are holes not only in the funding system devised by the Government but in the 10-year transport plan. His final remarks about the need for a transport authority for Wales deserve detailed consideration, as does the development of genuine transport authorities, along the German model, across the United Kingdom.

One of the issues that we have failed to address today is that of the integration of the different modes of transport. I am well aware of the various reports that are being made on that subject, but I am conscious that many of them have been delayed for far too long.

Three other very brief—

Andrew Bennett (Denton and Reddish)

There is little time available for the wind-ups, and the hon. Gentleman has had his third of it.

Mr. Foster

I am grateful to the hon. Gentleman. That is why I shall take only another 30 seconds. I hope that the Minister will tell us what the Government's plans are in respect of the asset register for Railtrack, which I think is very important, and that he will give us his views on vertical integration, which the Committee has criticised. Finally, I hope very much that next time the Committee produces a report that is as good as this one, it will receive a more detailed response.

5.5 pm

Mr. Malcolm Moss (North-East Cambridgeshire)

Give the Liberal Democrats an inch and they take a mile. I shall be brief, because we want to give the Minister plenty of time to wind up. I congratulate the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) and the members of her Committee who worked so hard on an excellent report. May we also express our desire that she continue her fair and scrupulous work as Chairman of the Transport Committee? May she produce many more reports of this quality.

My hon. Friend the Member for Epsom and Ewell (Chris Grayling) touched on privatisation. The Government are not backward in coming forward, as the hon. Member for Bath (Mr. Foster) said, when it comes to espousing the benefits that accrue to privatisation. My hon. Friend the Member for Epsom and Ewell pointed to the stimulus to the growth in traffic—both of freight and of passengers—the greater investment that has gone in through the private sector, the new rolling stock that has been produced, and the improved services. Mention was made of the Chiltern line. I would add to that GNER, which I use to travel from the eastern region. That was transformed overnight as a result of going into the private sector.

Complaint has been made. The hon. Member for Reading, East (Jane Griffiths) spoke about the assets of the rail industry being sold at too low a price. The problem occurred because the Labour Opposition opposed privatisation tooth and nail and gave the impression that when it came to power it might renationalise. That made it difficult to get a true value for the assets in the City. As for fragmentation, it might be that in the light of that problem the Treasury told Ministers at that time that it needed to maximise the return on the equity by making fragmentation possible.

It is clear from the report that the Committee was not happy with the way in which the Government handled the failure to achieve long-term franchise contracts. From GNER's point of view, the franchise replacement programme suffered from a lack of clarity and strategic vision. According to GNER, bidders were invited to embark on a costly journey without knowing the conditions of carriage and unclear as to the final destination.

The report also refers to the problem of introducing new trains if there is a change of franchise. It says that it is no good the Government's saying that that is covered by section 4 of the Railways Act 1993. The industry's experience—GNER is an example—is that it is virtually impossible to get deals in the private sector under section 54 because of the uncertainty beyond the two-year extension.

I take issue with the hon. Member for Stoke-on-Trent, South (Mr. Stevenson) in respect of fragmentation. His argument goes further than the report in wanting to take the Railtrack enterprise back into the public sector—at least, that is what I read into what he said. The report's conclusions on fragmentation are not clear. First, it says that there is no evidence for vertical integration, yet even on a regional basis that would be an obvious way of solving the fragmentation problem. It has been put on one side, however, because the industry as a whole obviously does not want to go down that road. The private operating companies may not wish to take on board the incredible problems that they see in the infrastructure and the network. It is important that the Minister takes the opportunity to clear up whether successor franchises could take on new rolling stock under that section.

As far as enhancement is concerned, the report is clear about concerns about special purpose vehicles. We share that view, because the City has not yet come forward with a clear policy, even though it is at the heart of delivery by the private sector. If £30 billion-odd is to be made available for enhancement of one kind or another—even new line build—but the SPVs being promoted by the Government do not work, the industry will face one heck of a problem. It is vital that the Government make clear soon rather than later precisely how they expect the things to work.

On administration, the report divided into two—a majority and a minority report. It did so mainly on political lines, but the evidence seems to point in the direction taken by the minority report. That was back in January, or even December 2001, but subsequent events have tended to support the minority report's conclusions on how and why Railtrack was taken into administration by the then Secretary of State. For example, it was claimed that Railtrack was insolvent, but evidence has since emerged that in October last year it certainly was not insolvent, and that if the Government had made money available, Railtrack might have been able to go to the City for further loans.

The former Secretary of State was also preparing the ground for Railtrack to be taken into administration long before he admitted doing so. A press report—it was not denied by the Government; if the Minister wants to deny it this afternoon, he can—said that under a project code-named Ariel, the Secretary of State began the process of winding up Railtrack fully six weeks before he acted. Furthermore, the Department asked the Stationery Office to print orders relating to Railtrack's administration on 28 September, a week before the Secretary of State said that he took his decision to wind up the company. Further evidence has come to light in the last few weeks, as my hon. Friend the Member for Epsom and Ewell pointed out. The Paddington Survivors Group claimed that, at a meeting with the Secretary of State on 12 September, they were told that Railtrack would be replaced, yet he told Parliament on 7 October that he had made his decision on 5 October.

The media anticipate an announcement being made tomorrow—it would help if the Minister could clarify this—that Network Rail has finally done a deal to get Railtrack out of administration. Of the money available for that, £500 million will be used to buy off shareholders, despite the fact that Ministers have said more than once that that would happen over their dead bodies. That £500 million works out at about £2.50 a share; the shareholders are asking for £2.80 a share, so the two figures are close. However, that £500 million includes a £300 million bung from the Strategic Rail Authority. That is Government money so presumably it will either come out of the public sector borrowing requirement or have to be repaid. It would be helpful if the Minister would say which.

The total package is some £9 billion. It will be made available by various banks as bridging finance, but underwritten by the SRA—for which read "the Government". Will all that money count against the PSBR, and if not, why not? From the £9 billion, £6.5 billion will pay the debts of Railtrack plc. It will also settle £400 million of inter-company loans and provide £2 billion for working capital for the next few years of ongoing operations. Will the Minister confirm whether those figures are correct? If they are, will he say whether an announcement will be made tomorrow or early next week? There should be a statement made on the Floor of the House by the new Secretary of State.

This is an excellent report. Reading it, I got the impression that the Committee wanted to go further but held back. However, it gave pointers to the direction that the Government should take, which includes more centralised control, especially of the SRA's operations, and tighter control of the activities of Network Rail. It would be interesting to hear whether the Minister agrees with the direction for the rail network suggested by some members of the Committee.

5.16 pm

The Parliamentary Under-Secretary of State for Transport (Mr. David Jamieson)

It is a pleasure to respond to the wide-ranging and interesting debate on the Select Committee's report and the Government's response. I echo the words of my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody), who said that the Select Committee exists to protect the interests of the voter and the travelling public. I totally subscribe to that view. I congratulate the Committee on its prodigious high-quality output since 1997 under my hon. Friend's leadership. She said that transport was important to the economy and important in improving the quality of people's lives. I agree wholeheartedly.

One or two hon. Members made remarks about Select Committees. I think that I am right in saying that I am the only person in the Chamber who has both been a Select Committee member and had to appear before one as a Minister. When I was a Select Committee member, I believed in rigorously challenging the Executive and in holding Ministers to account. I have not wavered from that opinion. Select Committees should be independent and should make their views known forcefully I congratulate the Transport Committee on having done that.

Following on from one of the comments made by my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson), one of the great benefits of the Select Committee system is that Back-Bench Members from a rich diversity of backgrounds—miners, bus drivers, advocates and teachers—can all make a special contribution to Select Committee reports. I am pleased to have this opportunity to respond to as many points as time allows.

Under the commendable stewardship of my hon. Friend the Member for Crewe and Nantwich, the Select Committee has produced a report on a subject of vital importance to the people of this country—the railways. The Government and the Select Committee agree substantially on many areas. For example, the Committee recognised that the Government were right to petition the High Court to put Railtrack into administration. To take up the point made by the hon. Member for North-East Cambridgeshire (Mr. Moss), it was not the Government but the High Court that took that action, which was not opposed by Railtrack at the time.

The Select Committee recommends that The Government must ensure that the Strategic Rail Authority provides the industry with a clear direction. We agree with that, and the Secretary of State's directions and guidance recognise the importance of the SRA's leadership role. The Committee went on to say that the Government should not interfere with the day-to-day management of the SRA, and we agree with that, too. We are pleased with the progress that has been made since Richard Bowker was appointed SRA chairman. We particularly welcome the publication on 14 January this year of the SRA's strategic plan, which sets out a series of measures to improve Britain's rail network and ensure that Government growth targets are met.

My hon. Friend the Member for Stoke-on-Trent, South made a valuable contribution on the issue of fragmentation. The SRA was established to provide leadership for an industry that had already been fragmented by privatisation. Our directions and guidance to the SRA recognise the importance of its leadership role, and require it to provide leadership and to work co-operatively towards common goals. In creating the SRA, we have introduced measures that will, I hope, end some of the fragmentation that has been criticised today.

The Committee also says: It is essential that Railtrack's successor has access to sufficient funds to operate, maintain and renew the rail network adequately". We agree. The Government have stated that they expect Railtrack's successor to be financially sound and to have a sufficiently strong investment-grade credit rating to finance its activities in an efficient and cost-effective manner. We also agree that Railtrack's successor must learn from the past. It must focus on the key task of delivering an efficient operational rail network and on its operation, maintenance and renewal.

I shall now take up as many of the points that have been made in the debate as I can. My hon. Friend the Member for Crewe and Nantwich raised the important issue of maintaining the rail system. Railtrack has admitted that its approach to maintenance after privatisation was mistaken—that too much decision-making responsibility was placed with contractors and that it carried out too few inspections of contractors' work. As my hon. Friend will know, Lord Cullen made recommendations to improve the management of contractors and the training of the work force in the rail industry, and we have asked the Health and Safety Commission to ensure that those recommendations are implemented in full. The HSC report published last week shows that contractorisation itself is not the problem—it is used successfully in other industries. The need is for better management and control and for a well-trained work force, and the implementation of the Cullen recommendations should deliver those improvements.

My hon. Friend the Member for Stoke-on-Trent, South asked whether Network Rail was a not-for-profit company. It has been described as a not-for-dividend company because any profit will be ploughed back into the rail system, which would not be the case if there were shareholders. We should bear in mind recent experiences with projects such as the construction of the Jubilee line, which went twice over cost and was two years late. Lamentably, that was in the public sector and the taxpayer bore the inconvenience and the extra cost.

We want to create special purpose vehicles to take forward some of the big projects. The financial risk of overrunning on time and cost would be borne by the private sector, not the taxpayer, and the channel tunnel rail link, on which we are making excellent progress, is a good example of that.

Mrs. Dunwoody

I am interested to hear the Minister say that the private sector would bear the risk. Jarvis is a company that is much in the news at present. Has he seen the statement that the company made this week, that the return on its deal on the underground would be beyond its wildest dreams and produce considerable sums? That rather suggests that the risk will lie with the taxpayer, not the company.

Mr. Jamieson

Sadly, the overrun and the cost to the taxpayer on the Jubilee line were well beyond anyone's wildest dreams. We want to ensure that there is no profiteering from the contracts, that they are delivered efficiently, that we know the cost up front, and that the risk is taken by the private contractor.

The hon. Member for Vale of York (Miss McIntosh) came up with an interesting concept, saying that if I did not disagree with her then I must agree with her. That sounds like something out of "Alice in Wonderland". She also said that we had destroyed private sector investor confidence, but nothing could be further from the truth. If anything destroyed confidence, it was the way in which the Conservative Government carried out rail privatisation. We have been given every indication of great interest in investing in our rail system, and the hon. Lady will see that happen over a period of time.

At one time I tipped the hon. Member for Epsom and Ewell (Chris Grayling) as a candidate for the Opposition Front Bench, but he could give no answer when he was challenged by the hon. Member for Bath (Mr. Foster) about what the Conservatives would have done about Railtrack. The hon. Member for North-East Cambridgeshire could not come up with an answer either. If the Conservatives are to be credible when criticising the Government, they will have to come up with some ideas of their own, and those ideas will have to stand the same tests of criticism and examination as our own policies do. However, I wish the hon. Member for Epsom and Ewell well in his career.

Miss McIntosh

Will the Minister give way?

Mr. Jamieson

I shall, although time is short and several other hon. Members want their points answered.

Miss McIntosh

I simply wanted to ask whether the Minister has read the evidence from the Freight Transport Association, whose members went on record as saying that they would require more financial certainty before they were required to invest in the railway system?

Mr. Jamieson

If the hon. Lady considers what is actually happening, she will see that the rail industry received £4 billion of private investment over the year 2001–02, and that more is on stream.

At half-time in the debate, my hon. Friend the Member for Reading, East (Jane Griffiths) gave us an interesting historical interlude. However, I was confused at one stage because I thought that she was saying that Bristol was in Cornwall. I am sure that it is not—at least, it was not when I last passed it on the train.

Electrification is not necessarily the answer, because the benefits that would have been gained 30 years ago would not be gained now. The people of the west country would no doubt be pleased if the trains on the line that goes through Reading to the west country were efficient, ran on time and did not break down, so I am pleased to say that new rolling stock is being introduced on that line. They would also be happy if the problems of the bottleneck between Reading and London were solved, as it causes major inconvenience not only to people in the west country, but to people in south Wales as well. However, electrification is not the answer to that problem, and it would be of environmental advantage only if the electricity were produced by renewable means, which is not always the case.

The hon. Member for Ceredigion (Mr. Thomas) rightly referred to the important issue of the Shrewsbury to Machynlleth, Aberystwyth and Aberdovey branch lines. I have considerable sympathy with the hon. Gentleman on that matter. As I have said on the Floor of the House, the finance is there, but we lack the skilled engineers needed to carry out the work. He proposed that another body might undertake the work, but I find it hard to believe that those skilled workers exist, because all companies are having difficulty finding such workers. If he knows of a project and wants to propose it, we shall consider it carefully, but I have to disappoint him on another matter: we are not going to consider renationalisation, although it is an interesting idea, because if we did so, there would be huge disruption and we would fall several years behind on investment.

My hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) made a studied contribution to the debate, as he always does. He referred to some of his local problems, and I would be happy to discuss those issues in correspondence.

The hon. Member for Bath and others asked about Network Rail and when we could expect to hear when Railtrack will come out of administration. Negotiations are under way, and if those negotiations are successful our hope is that Railtrack might be brought out of administration by the end of July. That is a challenging target, but we continue to work with all interested parties to achieve it.

I am sad to say that I have had less time to respond to the debate than the Liberal Democrat Front-Bench speaker took. None the less, the debate has been extremely valuable. If hon. Members want to make further points through correspondence, I shall be happy to respond—

It being half-past Five o'clock, the motion for the Adjournment of the sitting lapsed, without Question put.