HC Deb 30 June 1975 vol 894 cc291-2W
Mr. Lamborn

asked the Secretary of State for the Environment whether he will make a statement about British Rail's finances following the recent pay settlement.

Mr. Crosland

Last year we provided £1,500 million in the Railways Act 1974 for support to the railway passenger business. We also took powers to support railway pensions. It was then thought that the £1,500 million might last for five years or so. But the steep increases in the railway wage bill through two consecutive large settlements mean that the money will run out much sooner unless strong counter-measures are taken to increase revenue and reduce costs.

The board now needs total support of about £480 million a year. Of this, about £90 million is attributable to the pension payments referred to above. I anticipate that State and local authority support for the passenger system will provide about £330 million of the balance. There remains a gap of about £60 million attributable to losses on freight which the 1974 Act does not cover.

With my agreement, the board is therefore considering urgently how it can reduce its dependence on Exchequer support. In the short term, relief must come mainly from higher fares and charges. The board has already applied to the Price Commission for an increase of 15 per cent. from 7th September in passenger fares and charges. Substantial increases in freight and parcels charges are also in prospect.

Next, the board has already taken action to reduce working expenses. It has also instituted urgent studies of its passenger and freight businesses aimed at identifying more precisely the worst loss makers and securing economies. The studies will cover questions of productivity, manning and the level and extent of services. The trade unions will, of course, be consulted.

For my part, I have set the board a short-term target of limiting passenger support payment for 1976 to no more than the present level in real terms. For the longer term I propose to set ceilings for the total level of support and borrowing within which the board will have to manage the railways.

On freight services, the Government view most seriously deficits for which there is no statutory provision. I have therefore requested the board to examine urgently ways and means by which these can be eliminated. I shall be making a further announcement about this as soon as possible.