HC Deb 21 October 1986 vol 102 cc776-8W
Mr. Chapman

asked the Secretary of State for Transport whether he intends to give British Rail new performance objectives when the present grant target expires at the end of 1986–87; and if he will make a statement.

Mr. Moore

I have written today to the Chairman of British Rail, Sir Robert Reid, setting out the objectives I want the Board to pursue over the next three years. The text of my letter is as followsMy predecessor wrote to you in October 1983, setting out objectives on your appointment as Chairman of the British Railways Board. The Government welcomes the substantial progress that has been made in meeting those objectives. We have been glad to support BR by approving important investments to renew and enhance the rail system. Over the last three years we have approved 18 major schemes worth a total of £930 million in today's prices. This expenditure amounts to a significant programme of modernisation. The major programmes under way increase the opportunities of the railway and—even more important—of the regions it serves. The electrification of the East Coast Mainline to the North East and to Edinburgh is a striking example. The building of the Channel Tunnel will be another great opportunity. You and your Board need to offer your customers an efficient railway providing good value for money. The Government will continue to support your efforts by approving worthwhile investment and by grant for socially necessary services; we are not asking for a programme of major route closures. This letter sets out the specific objectives the Government wishes you to pursue over the next three years (1987/8–1989/90). It supplements the statutory and financial duties of the Board.

Network South East I particularly welcome the new efforts to ensure that the London commuter services are reliable, attractive and punctual. I attach particular importance to close co-operation between British Rail and London Regional Transport in the provision and marketing of rail services for the capital. You are already examining with LRT how far it will be sensible to establish common measures of the quality of these services. I shall want to agree with you any revision you make in the standards set out in your last Corporate Plan. I value your assurance that you would consult me if unforseen circumstances should at any time make it necessary to consider measures that would materially undermine quality. I would like you to report annually on your progress. I want you to keep the pattern of London commuter services under review in order to develop proposals both to improve the service to the customer and to reduce your operating costs through improved efficiency. It is the Board's responsibility to determine fares—but I want to see a lower proportion of the costs met by the taxpayer; and you should increasingly seek to reflect in your fares structure the costs of provision, and improvements in quality of service. In the light of these considerations, I want you to make a significant reduction in the grant requirement for Network South East by 1989/90.

Provincial Services I shall want to agree with you suitable standards for the quality of services in this sector. Major investments in the rolling stock such as we have approved, and new measures to reduce the cost of lesser used lines, together offer a much improved future for many of the provincial services. I want you to continue to tailor the pattern of services more closely to demand. While these changes should enable you to make modest, but worthwhile, reductions in the Sector's need for support, grant will still be very substantial. It should not of course be used to compete unfairly with newly liberalised local bus services and I understand that you would not envisage setting rail fares generally below the equivalent bus fares. The new powers which Parliament has provided for you to subsidise guaranteed substitute bus services connecting into the rail network give the opportunity to review those cases where attractive bus services could meet the needs of travellers as conveniently and often at markedly less cost than the present rail services. You will wish to conduct such reviews before proposing re-investment in rolling stock for lines of this character.

The Grant Target I want you to aim by 1989–90 to reduce to £555 million (in 1986–87 prices) the PSO grant requirement from Central Government for the Provincial Sector and Network South East combined calculated on the present basis.

Non-supported Services It has long been the policy of successive governments that long distance rail services should operate in fair competition with coach and air services. It is already an established aim that after next year the Inter City services should operate without a grant. I will re-define the Public Service Obligation accordingly later this year, and make provision for a final payment of grant in 1987–8. This enables us to make a major change in the regime governing the railway, by setting a comprehensive medium term financial target for the major part of your operations. This will cover the Inter City passenger services, Freight, Freightliners and Parcels, together with Travellers Fare. These sectors will be expected to continue to plan on the basis of a required rate of return of 5 per cent. on their programme of new investment. Your overall target is to improve their performance so as to earn a return of 2.7 per cent. as a current cost operating profit on net assets before interest by 1989–90 on all these businesses taken together. I want you to set demanding targets for each of the businesses and to report each year on their achievement.

Contribution of the Private Sector I share the Board's desire to see rail businesses that can flourish and prosper far into the future. Their success will be greater if they can harness the widest possible range of resources available in the economy. This points to the need for vigorous measures to broaden the participation of the private sector in the provision of services to the railway to enable you to offer a more cost-effective and competitive service to your customers. We welcome the progress you have made in competitive procurement of railway equipment and rolling stock and in associating the supply industry with your research programme. Further steps to secure that others from outside the nationalised industry can play their part in the upkeep of the railway and its equipment, the supply of its needs, the development of its property, and the exploitation of the commercial potential of stations will all be welcome as ways of improving Railway finances. I would like the Board to establish specific programmes to this end and to report progress each year.

Public Accountability These clear objectives give you the opportunity to report more fully and clearly on both your financial performance and your progress in achieving your published quality of service standards. I would like you to set this out in your Report and Accounts each year. This should include:

  1. (a) the quality of service achieved against the agreed standards;
  2. (b) progress towards the grant target, including your own breakdown of the target between NSE and Provincial and the performance of each sector against those targets;
  3. (c) the current cost operating profit before interest of each of the non-supported businesses; and of the non-supported businesses as a group compared with the 2.7 per cent. target;
  4. (d) progress on your various initiatives to increase the contribution of the private sector."