HC Deb 12 December 2001 vol 376 cc309-16WH 1.30 pm
Miss Anne McIntosh (Vale of York)

I am delighted to have secured this debate on the implications for the railway system of Railtrack being put into administration. I take this opportunity to declare my interest. I hold minor shares in Railtrack, First Group and Eurotunnel, and am a frequent user of the Great North Eastern Railway service on the east coast route.

The shock waves felt when Railtrack was forced into administration are still reverberating around the railway industry. At a time when the Government are inviting private companies to bid for the public-private partnership contracts to run the London underground, the implications of forcing a solvent public limited company into administration are still being assessed. Under the new management and leadership of Steve Marshall as chief executive and John Robinson as chairman, Railtrack would have undertaken a number of savings this autumn, such as a redundancy programme. Those savings were made impossible by the administration procedure and, regrettably, delays on the railways have increased by 45 per cent. since 1 October 2001. It is worth noting that morale has collapsed among the management and employees, many of whom were shareholders.

I welcome the Under-Secretary of State for Transport, Local Government and the Regions, the hon. Member for Plymouth, Devonport (Mr. Jamieson) and look forward to his reply on why the Government have stopped publishing monthly punctuality figures. The Minister could not admit that they had stopped publishing those figures and simply said that they would publish quarterly figures. That will not be sufficient to enable parliamentarians and others to monitor the huge and regrettable increase in delays.

The net effect of the Secretary of State's decision to force Railtrack into administration is a cost to the taxpayer of £2 million in administration fees and £3.5 billion in the loan facility that was drawn down. That has dented investors' confidence in investing in the railways in future, and has increased the public sector borrowing requirement well into 2002.

The future of the railways will depend heavily on the injection of private capital, especially through the 10-year transport plan. Of the total spending of £63 billion envisaged under that plan, £33 billion— over half— was due to come from the private sector. It will be more difficult, expensive and risky to raise that capital in future in view of the increased risk.

I welcome the opportunity to debate those issues and draw the Minister's attention to what appears to be a climbdown by the Secretary of State in Select Committee evidence given last week. He seemed to say that public-private partnership management contracts with London Underground to run three of the lines would not go ahead if the value for money and safety criteria were not met. Perhaps the Minister could confirm that the Government have taken that on board, and that those lines may stay in the public sector.

I regret the huge uncertainty about the future of the son of Railtrack, Railtrack's successor, which remains in the balance. Even today, we do not know what shape it will take.

I turn to a regrettable episode from which we must draw experience, while asking the Minister how the Government will learn their lesson. Many of us prize the role of the independent regulator, which has implications for transport, the health provisions that the House is considering and the Ofcom Bill, which it will consider. Do the Government intend to wave a magic wand to remove the rail regulator's independence and bring him under the Secretary of State's powers of direction?

I regret that the Strategic Rail Authority's strategic plan will be further delayed because the new chairman wants to put his mark on it. Regrettably, the main result will be a deterioration in the railway system, a collapse in staff morale and a dip in performance. As I said, delays have increased since Railtrack went into administration, and the Government have used a regrettable procedure to prevent the SRA from publishing monthly figures.

In preparing for the debate, I consulted two train-operating companies that run services to and from North Yorkshire and have a connection with my constituency. I asked Virgin Trains whether the passenger timetable had been changed since Railtrack went into administration. Their representative confirmed that there had been no changes, but that completion of phase one of the west coast main line development, which will provide a 125-mph service, will slip from September 2002 to May 2003. He said: Talks continue on the future of Phase 2 which would have provided 140 mph in 2005. Railtrack will have to pay considerable penalties as a result. I am sure that the Minister agrees that that is deeply regrettable, and he may care to tell us what the penalties are. He might also like to comment on whether the delay would have happened if Railtrack had continued as a company in its own right rather than going into administration.

The representative of Virgin Trains concluded: Punctuality remains a problem and Railtrack is currently responsible for about 75 per cent. of our delays, against a norm of about 50 per cent. Having said all this, Railtrack has now completed 68 per cent. of the Phase 1 work, our first new trains have been delivered and I am confident that passengers will soon be riding on the pilot services. I was fortunate enough to receive a reply from the chief executive of GNER, who also says that the timetable has not been altered as a result of the administration process. However, I have travelled north by train for the past four weekends and I have suffered an average delay of 40 minutes, which was not the case when the system was recovering after the events of Hatfield and, most recently, Great Heck.

GNER's chief executive says that all the train-operating companies are worried about Railtrack's morale, and about how we can ensure senior management's continuing involvement and support. He says that Railtrack and its administrators, Ernst and Young, plan to bring forward some sort of incentive arrangement ensuring that the senior management and others in Railtrack stay totally committed to the business during this very busy period. He concludes: Clearly there is a difficult balance to be struck between wanting to get the right solution for Railtrack and not rushing into a fudge. On the other hand, if it drags on for ages it would be disastrous for the railway industry in terms of falling morale. Everyone— this is an apolitical point— hoped and expected the Government to aim for an 80 per cent. increase in rail freight by 2010, and they did. However, they will not achieve that, because Railtrack has gone into administration and because of the new security arrangements at the Channel tunnel. I urge the Minister to tell us how the Government expect to meet that target.

The Minister may also want to comment on today's news that the Government, who are having difficulty finding a replacement management team, have now approached John Prideaux, an ex-senior manager of British Rail, to act as interim chairman. He joined Angel Trains and made a sizeable sum out of privatisation, for which I am sure the Minister would applaud him. The press has suggested today that the approach shows the Government to be duplicitous, as they have said that they do not want fat cats to operate companies such as Railtrack, but have turned to someone who is much more of a fat cat than the existing executives.

The cost of administration has run to £1.2 billion in the past two months, which has been largely composed of £450 an hour for the senior administrator and £350 an hour for the others. One wonders why we are Members of Parliament and not administrators. One or two years could be taken up with administration, which was surely not the Secretary of State's expectation. Ernst and Young now says that £3.5 billion will be required by the end of March, and the Railtrack group has said that that sum includes several costs that would not have been incurred if the Secretary of State had not forced its subsidiary into administration. That £3.5 billion includes £118 million of losses on the close-out of interest rate swaps, £79 million provided for utility companies such as electricity firms, and £50 million on professional fees. Those figures are worrying, and the Minister needs to tackle them.

Another worrying development in today's reports in the press relates to safety. Will the Minister explain why on earth the Secretary of State insisted that a new provision be added to the Cullen declaration before he was minded to sign it yesterday? It will push back the date of entry of the automatic braking system beyond the 2010 date originally intended by Lord Cullen. That development is highly regrettable, and we all deplore it. Why did Ministers refuse to guarantee to meet Lord Cullen's 2010 deadline for high-speed trains to have automatic train protection when they have made a commitment to do so on many occasions in the House?

There appears to be some confusion about the status of Railtrack. In reply to a written question, the Chief Secretary to the Treasury reported: Railtrack is a private sector company. During administration it will continue to be classified to the private sector in national accounts. Its debts will be recorded as a financial liability in the balance sheet of the private corporations sector."—[Official Report, 10 December 2001; Vol. 376, c. 694W.] The Minister will be aware that a written question asked by my hon. Friend the Member for Maidenhead (Mrs. May), who is the official Opposition's spokesman on such issues, drew the following reply from the Government: On 5 October 2001 provisional advice was given, based on the provisional information provided, that borrowing by RenewCo.… would be classified as public sector borrowing".— [Official Report, 4 December 2001; Vol. 376, c. 207W.] Will the Minister confirm that that is why his Department failed to bring Renewco into being? That sole omission— that failure to act— was probably the decisive reason why Railtrack went into administration.

There was an important exchange of letters between Sir Alistair Morton, chairman of the Strategic Rail Authority, who wrote on 1 October, and Sir Richard Mottram, permanent secretary in the Department, which exonerated the SRA of any responsibility for failing to bring Renewco into effect. Will the Minister confirm that that was a regrettable decision, and could be one reason why the Secretary of State brought Railtrack into administration?

I deplore the uncertainty for the rail industry, all the parties involved and the railway system caused by the Secretary of State's actions, but we must be positive and move forward. Will the Minister say what shape the successor body— son of Railtrack— will have? How long will Railtrack be left in administration? Will its successor be a company limited by guarantee, or will the Secretary of State confirm that private bidders will be eligible?

Shareholders and parliamentarians have a common interest in holding the Secretary of State to account for his actions. I deplore the fact that we were unable to receive many of the documents needed to throw light on how Railtrack was brought into administration. I refer to the recent legal action brought by the Railtrack shareholders' action group, whose lawyers asked the Secretary of State for documents relating to legal claims over his decision to force Railtrack into administration. They say that they have been hampered in their attempts to obtain all relevant facts, most notably by the Secretary of State's inconsistent account of events.

I look forward to the Minister's response. I hope that he will give a positive, forward-looking account and say that Railtrack's period in administration was deeply regrettable and will not last longer than six months. I hope that we will today find out the shape of Railtrack's successor.

1.45 pm
The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Mr. David Jamieson)

I congratulate the hon. Member for Vale of York (Miss McIntosh) on securing the debate. It allows us once again to run through the issues, and I am always pleased to do that. It is your imperative, Mr. Winterton, to ensure that Ministers give full and clear answers to questions, and I shall endeavour to do that.

I was perusing the Yorkshire Evening Press of 28 November, in which the hon. Lady complained that a written answer that I had sent to her was not clear enough. She said: I asked a simple question about what is a very important subject. What I expected in return was a simple answer. It appears that the hon. Lady did not understand the answer. If at any time today she does not understand what I am saying— if she wants me to slow down or stop— I should be happy to assist her.

Miss McIntosh

Will the Minister give way?

Mr. Jamieson

If the hon. Lady does not understand what I am saying, I shall certainly give way.

Miss McIntosh

As the Minister has referred to the written answer, perhaps he would explain the difference between sections 26 and 26(c) of the Railways Act 1993.

Mr. Jamieson

If one of the hon. Lady's bright young advisers— provided with the help of the Short money that a Labour Government generously voted through— cannot help her with her query, I should be happy to refer her to my officials, who could talk through those important matters with her.

The hon. Lady asked a few important questions. I shall give a generic view of Railtrack and the future of the railways. She said that Railtrack was forced into administration. Railtrack attended the hearing, but did not oppose the order. Perhaps the hon. Lady— a shareholder herself— would like to reflect on why the order was not opposed.

Miss McIntosh

I am surprised that I am not on the Government Benches and the Minister is not on the Opposition Benches, as I am answering all the questions.

It is clear that Railtrack did not oppose the petition because the Secretary of State had prepared orders that would have prevented the rail regulator from applying for an interim review. It is complete nonsense to suggest that Railtrack could petition the court; it could not.

Mr. Jamieson

I am grateful that one of the shareholders of the company has put on record why Railtrack did not oppose the order. I understood that the company could have opposed it.

The hon. Lady said that morale has collapsed and that there has been a dip in performance. For many years— both before Railtrack existed and recently— we have tracked a dip in performance at this time of year. The quarterly figures give a better guide than monthly or daily performance figures.

The hon. Lady mentioned the Secretary of State's recent comments about PPP and London Underground. She said that the Secretary of State told the Committee on which the hon. Lady sits that PPP would not go ahead if it were not shown to provide value for money. I should have thought that the hon. Lady would question me if the Secretary of State had said the opposite— that PPP would go ahead regardless of whether it gave value for money.

The hon. Lady asked further questions on issues such as investor confidence. It is nonsense to suggest that what happened to Railtrack will deter future investment in private finance initiatives or public-private partnership initiatives. It may disappoint her to know that a dozen or more leading banks are working with bidders to support our plans on a number of schemes. That may be bad news for her, but it is the case, so she can change her script from now on.

The hon. Lady asked about the regulator. As she knows, in other utility sectors, regulators have the dual role of balancing shareholder and consumer interests. That would not be the case if the company were under the limited guarantee model. The Government intend to introduce legislation to streamline the regulatory regime by creating a single strategic and economic regulatory body. I hope that that helps the hon. Lady. I assure her that any new body would be a non-departmental government agency and would be charged with developing and executing an industry strategy that was derived from our 10-year plan. The powers and responsibilities will be set out in legislation.

There has been considerable debate on Railtrack in recent weeks, but the railway is important to the general public and to frequent and regular users, such as me. I passed through the hon. Lady's constituency on a Great North Eastern Railway train yesterday— I did not stop because I was on my way elsewhere— and I am familiar with issues involved in railway use.

Let me make this clear from the outset: the Government are committed to the rail system. We pledged funding of more than £30 billion over the next 10 years to maintain and improve the network. That pledge stands, and nothing that has happened during the past few weeks changes that pledge in any way.

The decision to take Railtrack into administration was right and proper. I assure the hon. Lady that my right hon. Friend the Secretary of State took no pleasure in submitting the petition to the High Court in October. I remind her of the judge's comments at the time. He made it clear in granting the petition that he considered the administration order to be not only appropriate, but absolutely essential. That is probably why the order was not opposed at the time, contrary to the hon. Lady's comments.

We should not be in any doubt: Railtrack was a company that had failed totally to control its costs and deliver the service that was demanded by its customers, despite billions of pounds of extra investment from the Government. I thought that the hon. Lady shook her head when I suggested that Railtrack had not delivered the service demanded by its customers. If she is suggesting that Railtrack was delivering such a service before October this year, I will be interested to hear that because there has not been a substantial change over recent weeks.

Railtrack's proposal for additional assistance was for an open-ended funding commitment from the Government with no guarantee of improved performance. Without such assistance, the company was clearly insolvent, contrary to what the hon. Lady said. At that point, my right hon. Friend the Secretary of State said that enough was enough. He was not prepared to make such a commitment from the public purse.

My right hon. Friend the Secretary of State was clear about his duty to rail users and the taxpayer. He had to act. If he had not petitioned for a railway administration order, there was a real danger that the operation of the whole network would have been placed in jeopardy. Rightly, he was not prepared for that to happen.

It is vital that we use this opportunity to ensure that the future of the rail network is properly secured. In the meantime, the administrator's responsibility is to ensure that the company's railway-related activities are carried out on a business-as-usual basis, while preparing recommendations for the Government on how best to transfer Railtrack out of administration. We stressed our wish to the administrator that, during administration, safety and services for passengers and the position of employees should not be affected. Under section 59 of the Railways Act 1993, the administrator has a duty to manage the affairs, business and property of Railtrack plc for the achievement of the purposes of the railway administration order in a manner that protects the interests of the members and creditors of the company in railway administration. The Government are doing their bit by providing adequate funding to enable the administrator to discharge his responsibilities. In those circumstances, it is extraordinary that the hon. Member for Vale of York suggested that, not only should we not have applied for the administration order, but now that the administrator is in charge of the company, he should not have sufficient funds to carry out the work. The railway system would collapse if the Government did not step in and provide the administrator with the funding that he needs.

The hon. Lady asked about the timetable for administration. Ultimately, that is a matter for the administrator. We share his hope that the process can be completed as quickly as possible. His initial estimate was that it could take up to six months to transfer Railtrack plc out of administration. It has become clear that the state of the company, combined with the time needed for bids to be formulated and considered and for a transport scheme to be approved, makes a six-month timetable practically impossible. I assure the hon. Lady that we share her worries that such matters should come out of administration at the earliest opportunity.

Mr. Geoffrey Clifton-Brown (Cotswold)

Will the Minister give way?

Mr. Jamieson

I shall not give way. We have little time left and it is only proper that I should answer the hon. Lady's questions. I am sure that I will be talking to the hon. Gentleman at another time.

The hon. Lady expressed her concerns about safety. I assure her that we remain committed to keeping safety paramount and at the heart of our policies for revitalising the railways. Railtrack plc, in administration, remains responsible for the safety of the rail network. The Health and Safety Executive is working closely with both Railtrack plc and the administrator to ensure that safety is maintained. Alan Cooksey, the Health and Safety Executive's former deputy chief inspector of railways, has been recruited by the administrator to ensure that technical issues are given proper and expert consideration while the company remains in administration. Furthermore, no train operating company has raised safety concerns with the HSE since Railtrack was taken into administration.

It is true, as the hon. Lady said, that performance has worsened recently. Obviously, I am disappointed to see any increase in delays on the rail network, but I totally refute her suggestion that they are a result of Railtrack being taken into administration. I assure her that any dip in performance is a replication of what has happened in previous years. It is not due to the administration of Railtrack, but probably to more seasonal matters.

When the SRA publishes its passenger performance measure— the standard measure of rail performance—we will have a clearer understanding of the issue. The PPM will be published in due course, and 1 expect that any dip in performance will be no greater than that of recent years. The matter will be examined carefully, but the hon. Lady's allegations are premature in the extreme. That is not to say that we are complacent. We are working with the administrator, and will continue to discuss with him the best way in which to ensure that Railtrack delivers an improved performance while it remains in administration. My right hon. Friend the Secretary of State is in regular contact with the train operators and discusses such matters with them.

The hon. Lady referred to staff morale. Since the company went into administration, it is hardly surprising that the uncertainty has affected Railtrack staff. However, it would not be right or accurate to lay the blame on the staff for any delays, as she was suggesting. There are many dedicated, efficient and effective people in Railtrack and, while administration will no doubt have come as a shock to many of them, I am sure that they will work hard with the administrator to stabilise the company, will continue with its daily business and will keep its programmes moving forward. The railway business will continue. The country needs a rail network and good people to run it. The staff— both current and potential— can be sure that they have a secure future.

This has been another opportunity to set out many of the important issues that were raised by the hon. Lady. If she considers that some matters have not been covered today, perhaps she will jot me a note. I shall certainly respond to her expeditiously, clearly and in plain English. I cannot guarantee that it will be the Janet and John version of matters as they stand, but I shall give her a clear explanation.

Question put and agreed to.

Adjourned accordingly at Two o'clock.