HL Deb 22 July 2002 vol 638 cc34-6WA
Lord Haskel

asked Her Majesty's Government:

What are their proposals to incur contingent liabilities in respect of Network Rail, as set out in the minutes laid before Parliament on 27 June. [HL5385]

Lord Macdonald of Tradeston

In our statement on 27 June on Network Rail, we informed the House of two minutes laid that day setting out the contingent liabilities the Secretary of State for Transport 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 its 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 its considerations upon the European system of accounts 1995 (ESA95).

As we explained to the House in our Statement on 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 credit 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 judgment 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 to 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 the Secretary of State's intention to proceed as proposed and incur the liabilities set out in the minutes.

The Government judge that the contingent liabilities set out in the minutes 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.