§ Jane Griffiths
To ask the Secretary of State for Transport. pursuant to his statement of 27 June 2002,Official Report, columns 971–73, on Network Rail, if he will make a statement on the Government's proposal to incur the contingent liabilities set out in the associated minutes he laid before Parliament. 
§ Mr. Darling
In my statement on 27 June on Network Rail, I informed Members of two minutes I had laid in the House that day, setting out the contingent liabilities I proposed to incur on behalf of the Government to enable Railtrack plc to be acquired by Network Rail.
This classification of Network Rail was a decision taken, not by the Government, but by the Office for National Statistics. The ONS takes independent decisions in matters concerning the classification, preparation and publication of statistics. It was their view that Network Rail would be classified as a private sector corporation —once its board has been ratified by its membership — and that the company's borrowing could be classified as private sector borrowing in the national accounts. In reaching this conclusion the ONS has, I understand, based their considerations upon the European System of Accounts 1995 (ESA95).
As I explained to the House in my statement of 27 June the SRA is providing Network Rail with standby credit facilities. It is the commercial debt markets that will provide the required borrowing for Network Rail, with the credit facilities called upon in identified, though unlikely, circumstances. On this basis the SRA's standby credit569W
facilities are considered to be contingent liabilities and would only score as public expenditure in the extremely unlikely event of them being called upon.
The Comptroller and Auditor General of the National Audit Office has, in his capacity as auditor of the SRA, concluded that Network Rail should be accounted for as a subsidiary of the SRA. This judgement is based on the application of UK Generally Accepted Accounting Practice (UK-GAAP). As such the expenditure and liabilities of Network Rail will be accounted for in an open and transparent way—a very welcome step.
The provision of any funds necessary to meet the SRA's financial obligations could be made by way of grant under paragraph 7 of schedule 14 of the Transport Act 2000 or by permitting the SRA to borrow in accordance with paragraph 8 of that schedule. Whether the SRA's financial obligations (subject to normal supply procedures) would be met by a grant, by allowing it to borrow, or a mixture of both would be determined if the need arose.
It therefore remains my intention to proceed as proposed and incur the liabilities set out in the minutes.
The Government judges that the contingent liabilities set out in the minutes I laid before the House on 27 June provide robust means of quickly setting up a strong and well-managed company to take over the responsibilities of Railtrack as network operator. And to do so by uniting the rail industry to work together under the strategic guidance of the SRA with Government with the overall aim of delivering the efficient, safe and reliable railway network that customers want.