§ 3.5 p.m.
The Earl of Caithness
My Lords, I beg to move that this Bill be now read a second time.
I believe that at the start it is right for me to say that I find it strange to take part in a transport Bill without the late Lord Underhill. The House is the poorer for not having his presence and his expertise available to us today.
I am sure that your Lordships will agree that in this country there is a special attachment to the railways and people want to see the best use made of them. The railways do indeed have an important role to play in the country and in the economy. The Government recognise that and are committed to providing the railways with a sound and long-term future, to maintaining the rail network, to safeguarding continuity of service and to continuing to pay subsidy for socially necessary services.
But we must face the facts. Rail's share of the passenger market has dropped from about 20 per cent. in the 1950s to about 8 per cent. to 9 per cent. now. Over the same period rail's share of the freight market has fallen from 40 per cent. to 7 per cent. It is self-evident that public sector ownership is not a solution despite continued heavy investment in the railways by the taxpayer. We must look to other arrangements to provide the solution that we all want. We must look to alternatives.
Let us not forget that nationalised industries used to cost the taxpayer £50 million every week. In 1978–79 the cost was £2.6 billion, more than a third of that year's NHS budget. That was manifestly wrong. We have returned many of those industries to the private sector against the trenchant opposition from the parties opposite and we will doubtless hear the same rants again today. Those industries are again making profits and they now contribute around £2 billion a year to the Exchequer in corporation tax which has allowed us to spend record amounts on social security, health and British Rail.
The Earl of Caithness
My Lords, no; I must continue. The transport sector is a particular success story. No longer is the taxpayer having to fund investment in buses or aeroplanes nor improvements at London's major airports. Trade at Tilbury, London's major port, is no longer in decline as it was 1427 in the public sector. The privatisations of British Airways, the National Bus Corporation, the National Freight Consortium and Associated British Ports, are fine examples of the success of the Government's privatisation policies.
Let us not forget that in 1980–81 British Airways cost the taxpayer £137 million whereas in 1990–91, BA contributed £31 million in corporation tax while most state-owned airlines were still loss-making. That is but one example of a former nationalised industry which has flourished when transferred to the private sector. So it is right that our railways should also be allowed to receive the benefits of the private sector.
I would be the first to acknowledge that over recent years improvements have been made by British Rail and I am sure that your Lordships will join me in paying tribute to the staff, the management and the board of BR. However, while BR remains a public sector monopoly, subject to all the constraints of a traditional nationalised industry, there is a limit to what can be achieved. Public dissatisfaction with railway services has grown and we must respond to that.
There needs to be increased consumer choice and greater responsiveness to the needs of rail users. The private sector operates in a culture where the needs of the customer can be put first. We believe that the way to improve rail services is to create the maximum opportunities for the private sector involvement in the management, operation and financing of the railways.
The Government's proposals will provide the fresh approach needed to revitalise the railway industry and allow it to make the most of its advantages. We want the country to be able to regard the railways not only with affection but with pride.
Our proposals were set out last summer in a White Paper. The key elements are to split responsibility for infrastructure from the operation of services and give it to Railtrack, a Government-owned company independent from BR; to franchise existing services to the private sector; to give new operators access to the track to run passenger and freight services and to transfer BR's existing freight and parcels business to the private sector.
Since the White Paper we have been filling out details of our policy in a series of consultation documents, policy statements and reports. These documents have covered a number of key issues including franchising, pensions, arrangements for ensuring safety, network benefits, the role of the consumer committees, charging for access, the future of the British Transport Police and, most recently, the Government's proposals for the future of BR's rail freight business and for rolling stock ownership, procurement and finance. I hope that noble Lords also find helpful the policy guide explaining our policy on many of these issues, which was made available in advance of this debate, together with the Notes on Clauses.
The Government have also welcomed the contribution to the debate made last month by the report of the Select Committee on Transport in another place. A particular focus of that report was the need for a 1428 gradualist approach. We agree. There is a great deal of work to do and we want to get it right. We are taking a gradualist and flexible approach. As the Economist stated:The strength of the MacGregor proposals lies in their flexibility".Your Lordships' consideration of the Railways Bill is an important part of this development process. I hope that your Lordships will find it helpful if I spend a little time explaining where we have now reached in the key areas of our policy for the railways.
Franchising is, we believe, the best way to introduce private sector management and private sector capital into loss-making services while providing safeguards for socially necessary services. The Government's plans for the restructuring of BR's passenger network into the 25 businesses based on BR's profit centres that will be the basis for franchises were announced at the end of last month. Their final form will depend on further work and Royal Assent to the Bill.
I would also mention here the future role for the passenger transport executives. The Government have made it clear that they see a continuing role for the PTAs and the PTEs in specifying and paying for local passenger rail services in their areas. We want the PTAs and PTEs to be fully involved in the new structure. To that end, the PTEs will be jointly involved with the franchising director in granting each franchise covering PTE services and will be co-signatories to the franchise agreement.
Concern has been expressed that dividing up passenger services into franchise units will lead to a loss of network benefits that are valued in the present system. The Government are meeting these concerns in a number of positive ways.
Franchising will take place progressively and on the basis of the timetable existing immediately prior to franchising. Railtrack will be responsible for producing the working timetable for the whole network and a national timetable will be published for all licensed passenger services. Through ticketing will continue to operate across the network and operators will be required to participate in common ticketing and revenue allocation arrangements.
The Government have also announced that all franchisees will be required to participate in discount fare schemes for senior citizens, disabled people and young persons. And, in recognition of concerns about future fares levels, we will place a duty on the franchising director to have regard to the interests of passengers in considering the arrangements for securing reasonable fares. We will be bringing amendments before your Lordships' House to fulfil these commitments.
These measures will ensure that the benefits of the current unified passenger network are not diminished. Indeed, we firmly believe that private sector involvement will lead to new initiatives which will benefit existing rail users and attract more passengers to the railway, just as it has done with buses, ports and aviation.
A consistent theme in our proposals is the need to ensure continuity of service for passengers. For example, arrangements will be put in place to ensure 1429 that the assets necessary to run a franchise can be transferred from one franchisee to the next. A further important element is the procedure we will establish in the event that a licensed railway operator should become insolvent. Under this procedure, where an operator is, or is about to become, insolvent, the court may make a "railway administration order" in respect of the company with the dual purpose of transferring the undertaking of the business to another company and of continuing to provide the service pending that transfer. These are strictly safety net powers. And, in the case of franchised services, we do not believe that they are likely to be needed since before awarding a franchise the franchising director will look at the financial standing of bidders and their management competence. But the provisions in the Bill give extra security to passengers.
Safeguarding continuity of service is also a feature of the new closure procedures. The franchising director will be under a duty to secure continued provision of the services concerned unless and until consent to closure is given after the necessary statutory procedures have been completed.
There have been concerns expressed that privatisation will lead to widespread closures. These fears have no foundation. There is no hidden agenda for a closure programme. The provisions in the Bill simply create procedures for the new circumstances of the passenger railway. They are as rigorous as the existing procedures.
The Government are committed to maintaining a strong voice for the consumer. The Transport Users' Consultative Committees and the Central Committee have had an important role to play in representing the passenger. The new rail users' consultative committees which will replace the TUCCs will continue this role and, indeed, we intend that it should be strengthened. We intend to bring forward amendments which will enable the new committees, unlike their predecessors, to consider all aspects of fares. I also want to assure your Lordships that the consultative committees will be completely independent when commenting on issues affecting rail passengers. It is appropriate, however, that they should come under the wing of the regulator who will have a duty to protect the interests of users.
We all recognise that maintaining safety on the railways is of paramount importance. The Government and BR have accepted all of the Health and Safety Commission's 37 recommendations in its report on the safety implications of our proposals. Under the report's central recommendations, all operators, including Railtrack, will have to produce a railway safety case to demonstrate that they have systems in place to meet the required safety standards and to manage their operations safely. We, BR and the HSE are satisfied that the new safety regime will not lead to any diminution of safety on the railways. The safety regime will be implemented by regulations to be made under the Health and Safety at Work etc. Act. Preparation of the regulations is now in hand and there will be public consultation later in the summer.
Another particularly important issue is that of pensions. In January, the Government published a 1430 consultation paper on their proposals for railway pensions after privatisation. Since then, there have been very helpful discussions with representatives of both pensioners and contributing members to the BR pension schemes, with the trustees, with the main railway trade unions, and with the BR board.
Following this consultation, the Government announced their conclusions last month. We reaffirmed our objective of preserving the security of pension rights enjoyed by pensioners and members while adopting arrangements to suit the new structure of the privatised industry. For serving staff, a joint industry pension scheme for the railways will be set up to succeed the present arrangements. Arrangements will be put in place to safeguard the transfer of pension funds at the end of a franchise, and those staff serving when this Bill receives Royal Assent will have an individual right to remain in the joint industry scheme for so long as they are still employed in the railway industry.
For existing and deferred pensioners, a closed scheme with appropriate support by investment will be set up in due course. The division of funds will be subject to independent actuarial advice, and the pensioners will be able to benefit from any future scheme surpluses that there may be. The Government are content for the pensioners' closed scheme to be managed as part of the joint industry scheme, provided that the governance arrangements are satisfactory. To allow the trustees the time that they need to rearrange their investments to secure the pensions of their members, the pensioners will continue in the BR scheme with the board's remaining employees while this is undertaken.
Final decisions about the structure and funding of the successor schemes will take account of the results of the valuation of the main BR scheme currently being undertaken, and the recommendations of Professor Goode's Pension Law Review Committee.
The Government are committed to maximising the amount of freight carried by rail wherever practicable. To this end, a number of measures are proposed. These include open access to the railway network for freight operators from April 1994; an enhanced capital grants scheme for freight facilities; a new grant to help defray track costs charged by Railtrack, where there are quantifiable environmental and social benefits and the alternative road option is cheaper; and, we are considering the responses to consultation on a lorry weight concession to allow 44 tonne lorries for intermodal freight journeys, where the trunk haul is by rail.
The Government have also recently announced their proposals for the future of BR rail freight. We propose that trainload services, which represent 80 per cent. of total BR freight revenue, should be re-created into three competing but initially regionally based companies by April 1994. That structure will inject competition while retaining long-term viability. Transfer to the private sector is likely to take place in 1995. "Freightliner" handles containerised services. It will need a radical overhaul to achieve long-term viability. We have sought by the end of July, and have already had, a number of expressions of interest. It is 1431 the intention that European freight services will be privatised as soon as practicable after British Rail has established the business.
Finally, the Government have also recently clarified their proposals concerning passenger rolling stock. We are taking a number of measures to promote the development of a rolling stock leasing market. The measures include approval in the Autumn Statement for BR to lease £150 million of new passenger rolling stock. From 1st April 1994, BR will transfer its passenger rolling stock to newly established public sector companies which will lease the stock to franchisees. We intend that those companies should transfer to the private sector as soon as practicable. The franchising director will be able to give undertakings to lessors that new trains they supply would be used for successive franchises. That should help encourage private sector investment in rolling stock in the early years before an active secondhand market for rolling stock develops, because it will give the lessor a suitable assurance of continuity.
The Railways Bill provides the statutory frame work for the implementation of those policies and is divided into three parts. Part I covers the provision of services under the new regime. Clause 1 and Schedule I provide for the Secretary of State to appoint the rail regulator and the franchising director. The regulator will issue licences and oversee access to infrastructure. He will prevent anti-competitive behaviour and protect consumer interests. The franchising director will carry out the franchising programme in accordance with guidance and objectives given to him by the Secretary of State. The duties of the regulator and the franchising director are set out in Clauses 4 and 5 respectively. Clauses 2 and 3 and Schedules 2 and 3 deal with the setting up of the rail users' consultative committees.
In common with other privatised and regulated industries, operators of passenger and freight services and network, station and light maintenance depot operators will be licensed. Clauses 6 to 14 establish the licensing regime. The licence and conditions imposed in the licence will be a key to regulating the industry. Those clauses provide also for modifications of licences and exemptions from licensing. Clauses 15 to 19 provide the legal framework for access agreements between Railtrack and operators. All access agreements will have to be approved by the regulator. There is provision for the amendment of access agreements in limited circumstances and, as with licences, there is provision for exemption.
The franchising of passenger services is dealt with in Clauses 20 to 27. I would draw noble Lords' attention particularly to Clauses 24 and 26 which deal with the transfer of franchise assets and the role of the franchising director in the event of failure to award a franchise, to which I referred earlier. The role of the PTEs in the provision of franchised services for their areas is provided for in Clauses 28 to 31.
Clauses 32 to 42 cover closure procedures. As I have already explained, those procedures are just as rigorous as the current procedures, but they have had 1432 to be adapted to fit the new circumstances of the passenger railway. The franchising director's powers in relation to securing continued provision of services either in agreements with third parties or through his wholly owned company are contained in Clauses 43 to 45.
The remainder of Part I contains a wide range of other measures needed to underpin the provision of railway services in the new regime. I would mention here particularly Clauses 49 to 52 which deal with the enforcement powers of the regulator and the franchising director in respect of licences, access agreements and franchise agreements. Clauses 53 to 58 and Schedule 5 are concerned with railway administration orders, winding-up and insolvency, and also provide for government financial assistance where railway administration orders are made. Clauses 59 and 60 deal with competition law aspects of the provision of railway services. The requirements for the keeping of registers and the publication of annual reports by both the regulator and the franchising director are covered in Clauses 64 to 67. Finally in Part I, I would mention the duties and functions of the central committee and the consultative committees which are set out in Clauses 68 to 71.
Part II of the Bill provides for the restructuring of BR. The powers it contains will enable companies to be formed out of BR, and for those companies to be transferred to the private sector. Thus the passenger franchise units will be formed first as companies within BR as will the freight businesses. The creation of Railtrack as such a company for transfer to the direct ownership of government in April 1994 will also happen under the powers in Part II of the Bill. The company-forming powers will be found in Clause 77. Transfers will take place under Clause 78 in the case of franchise companies, or otherwise under Clause 82. Clause 79 empowers the franchising director to make transfer schemes which will be the mechanism for ensuring the smooth transition from one franchise to the next.
Clauses 84 to 90 contain supplemental provisions in respect of transfer schemes, but I draw the attention of noble Lords to the important provision in Clause 86 which confirms for the avoidance of doubt that the Transfer of Undertakings (Protection of Employment) Regulations 1981 apply to transfer schemes made under this part of the Bill.
Part II of the Bill also makes a range of provisions for the bodies to be created out of BR in respect of their ownership and finances as well as other miscellaneous financial and supplemental provisions. Noble Lords may, in particular, wish to note Clause 106 which sets out the Secretary of State's objectives in respect of disposals.
Part III of the Bill contains a range of miscellaneous, general and supplemental provisions a number of which will be of particular interest to your Lordships. Clause 110 facilitates the making of the regulations under the Health and Safety at Work Act etc. to implement the new safety regime. Clause 111 deals with the control of the railways in time of hostilities and emergencies. Clause 113 deals with railway heritage and contains provisions to enable a 1433 scheme to be made which will ensure that the historical records and artefacts of publicly owned railway companies, the board and its subsidiaries can still be offered to the institutions such as the Public Records Office or the National Railway Museum at York.
Clause 114 provides for the Railways Board to be discharged from its existing statutory duties progressively as new bodies take over. Clause 116 will allow new railway operators, as BR does now, to make by-laws and Clause 117 will enable the Secretary of State to make regulations that will give new operators the ability that BR has now to operate penalty fares schemes. Clause 118 exempts certain railway agreements from the Restrictive Trade Practices Act. Clauses 119 and 120 deal with future arrangements for the British Transport Police and enable the Secretary of State to make a scheme for its organisation, control and administration.
Clause 121 introduces Schedule 10 which deals with the important issue of pensions which I covered in some detail earlier. Clause 122 deals with another issue of importance to employees— that of concessionary travel facilities. Clauses 123 to 129 contain financial provisions to allow the provision of subsidies and grants in the new railway, including the measures aimed at encouraging the carriage of freight by rail (Clauses 124, 126 and 127) to which I referred earlier. I would also note Clause 128 which provides for financial assistance for management/employee buy-outs.
We believe that the railways will benefit from private sector involvement in the same way as have other privatised transport industries. We have led the world in our privatisations policies. We have taken the lead in seeking to privatise our national railway system. Other countries, particularly in Europe, for example, Germany, are now thinking along the same lines and I am sure that once again they will follow our lead.
This Railways Bill represents a major change in the railway industry. Its purpose is straightforward. It will provide the means to bring about the improvements in the quality and quantity of services that we all wish to see. I commend the Bill to your Lordships. I beg to move.
§ Moved, That the Bill be now read a second time. — (The Earl of Caithness.)
§ 3.30 p.m.
§ Lord Clinton-Davis
My Lords, the whole House will wish to join the Minister in his kind thoughts about the late Reg Underhill. It is sad but somehow appropriate that this Second Reading debate should coincide with the day on which the memorial meeting for the late Lord Underhill will take place. I hope that the House will forgive me if I leave the Chamber for a short time in order to attend that memorial meeting. The Minister was right in saying that had my noble friend been spared he would have been utilising his considerable talents in dissecting and articulating his opposition to the Bill, as he did so powerfully when we debated the paving Bill. We miss him very much on these Benches and he is missed throughout the House.
1434 I thank the Minister for his gallant attempt to explain this inexplicable and implausible Bill. He seemed to approach his task with all the zeal and conviction of a still further John Major fight-back speech. Perhaps that was understandable because the Bill has scarcely a friend in the world. It is the Group 4 Bill; the Bill from which all common sense— political, commercial and even ideological — has been allowed to escape. It fragments the railways system at a time when we need a national system.
The point was put very well by a representative of the French railways, the SNCF, in an article in the Observer a few weeks ago. He said:Who on earth could bother with privatising little chunks of the system while we are building an integrated European transport system for the next century?".That encapsulates it all. Even the former Prime Minister had not pushed this idea. It germinated with the present Prime Minister's wistful but misplaced nostalgia about restoring the old LNER, LMS and the Great Western Railway. Of course, he could only have read about those matters. The idea moved into another phase of development; the half-baked and half-boiled idea in the Government's previous election campaign. It changed again with the White Paper, which was issued and then savaged in an unprecedented way by the Conservative-dominated House of Commons Transport Committee. The Minister says that the Government have responded to those criticisms, as indeed they have formally. but that response was pretty derisory. We shall return to those points when we debate the matter in Committee.
But, of course, it was during the Committee stage of the Bill in another place that the Government resisted nearly all the issues that the Minister spoke about. They resisted Labour and Liberal Democrat amendments about the need to protect the integrity of network benefits. They resisted the need for a national timetable. They resisted the need for Railcards, other than for people suffering with disabilities. They also resisted the need for the London Travelcard.
So what suddenly changed it all? I will tell your Lordships what changed it all: it was a few Conservative Back-Benchers who adopted the amendments at the Report stage of the Bill in the wake of the Newbury by-election results. That is what caused the change. It was not a listening government; it was not a thinking government. The fact is that the Government changed because they panicked. I do not believe that they have thought out those changes in the light of the concept of privatisation or commercialisation — whatever nom de plume they prefer to use— that they have now developed.
We take the view, together with the Transport Committee of another place, that the fundamental flaw in the Government's approach has been a lack of a proper integrated transport policy. There has been no coherent strategy dealing with railways as part of an entire transport system; a system which relates railways to roads, ports and airports and which talks coherently about an infrastructure policy. We have made that complaint over and over again, but to no avail as far as this Government are concerned.
Neither have they given the country any coherent idea of the railways system that they think the country 1435 should have, other than virtually to dismantle the present system. In their White Paper the Government dealt wholly inadequately with the crucial issue of investment. They expressed the hope, which was reiterated today by the Minister, that somehow or other private capital would be attracted to refurbish our much-neglected railways system. After all, during the years of the noble Baroness, Lady Thatcher, the railways were not only substantially neglected but virtually discarded in favour of the priority given to roads. That prior ity has been qualified only marginally by the present Administration because, despite Ministerial protestation of support for the railways and a determination that we have heard again today that freight should increasingly be transferred from road to rail, they have sacrificed British Rail on the altar of dogma. The investment in British Rail simply does not begin to compare with that in France and Germany.
The last time that I mentioned that subject the Minister accused me of being unpatriotic; a rather childish observation. But the fact of the matter is that that is the reality. Those countries recognise that a railways system is crucial to the operation of a single market in Europe. We have woken up late, if at all, to that important issue.
Of course, we recognise that British Rail has major difficulties and that there is a great deal of room for improvement, but not down the route that has been signified in this Bill. The fact is that there have been remarkable increases in productivity. The staff have shown a dedication to duty in the face of the most adverse conditions. But difficulties persist; and they persist substantially due to a lack of a settled programme of investment with all its impact on rolling stock, signalling and track.
The Government's belated conversion to the idea that British Rail could lease rolling stock had to wait for the latest Budget. Why did not the Government act much earlier on that proposal? We put it forward from the Benches in another place and in this House during a period of some three years. Why did the Government have to wait? We welcome the infusion of investment and expertise from the private sector. We believe that British Rail should be able to do what the French and other state railways have done for years. They should be able to go to the capital markets to sustain their investment programmes.
Moreover, access to the British Rail network regarding freight has been tried and has not altogether been found wanting in recent years. But the Government's vastly complex, bureaucratic, ill-considered and costly proposals are another thing altogether. They beg more questions than they ask. How in the medium and long-term can open access be reconciled with operable franchises? How if Railtrack is to make a return on its assets will freight be shifted from road to rail? Indeed, how will the freight side survive at all in an already declining market? Mr. Rifkind, when he was Secretary of State for Transport, announced that there was to be a change; that there was to be considerable movement from road to rail. It did not happen.
1436 How will the Government's environmental goals come within sight of fulfilment? How do the Government expect morale in British Rail to be maintained in the rump which will remain to manage the infrastructure and residual services that have not been cherry picked? How can the Government provide meaningful answers to those who ask what assurances can be given about rail closures in rural areas with all the pressure for subsidies to be expended in support of Railtrack? What will be afforded for those social service commitments to which the Government say that they are now fully committed? If subsidies are not dramatically increased, there simply will not be enough money to go round. Therefore, is it not ineluctably clear that the Treasury will not go down that road?
We share the anxieties of so many— the National Consumer Council, Transport 2000, rural pressure groups, and so on— who have made representations about the threat of closure of rural lines in the new environment to be developed. Neither we nor they are placated by simple assertions from Ministers that all will be well since the existing closure procedures will continue to operate. We shall live in a wholly changed system. The criteria for operating it are quite different from those that prevail today. Therefore, we support the notion that the role of regional user committees should be strengthened in those procedures and that those committees should be permitted to consider the impact of all such procedures and be free to comment on the findings without seeking the regulators' prior approval.
Listening to the Minister this afternoon one would have thought that the Government are putting forward a very simple series of ideas. That was not the view of Mr. Christopher Fildes writing in the Daily Telegraph on 24th May who said:What is now being wished on BR is a total reorganisation — 'route' [sic] and branch— with complexity built into it. They start with a straightforward management structure. They finish up with John MacGregor's train set.To operate a train on this set, you must first get a franchise from a modern version of the Fat Controller. Then you lease your stock from a leasing company and you rent space on the line from Railtrack— which in turn puts all its maintenance and engineering work out to contract. In the middle, working the signals, is the regulator. And behind him, pulling the levers, is Mr. MacGregor. In terms of running the railway, all this adds to the number of things that can go wrong. A bankrupt contractor, a terminated franchise, a leasing company that turns (as some do) into a financial black hole, a stand-up fight between the people with the trains and the people with the track— all or any of these could leave the Yorkshire Pullman delayed indefinitely".No wonder the late Sir Robert Adley, whom we miss, called this "a poll tax on wheels".
The bureaucracy is incredible. We shall have five new bureaucracies, 25 to 30 separate operators and five government agencies— Railtrack, a franchising director, the regulator, whose office I suppose will be called "Ofrail", and the Health and Safety Executive. There will be a joint industry body to deal with through ticketing. We shall have the statutory rail users committees and the PTAs. Huge numbers of legal agreements will have to be negotiated and signed. There will be train operators signing up with station 1437 operators and then with operators of marshalling yards. There will be 10,000 legal agreements for InterCity alone.
While the Bill is complex, it is a centralised mess. It is complicated and yet vague in so many material particulars. And yet, amidst all that, while we must recognise that the Bill is an enabling Bill, it seems extraordinary that one of the principal agencies to be inaugurated by the Government — Rai1track— does not even merit a mention. There is not one mention of it in any of the 132 clauses. As the author of that article put it, never have any government played such a significant part in "playing trains" as this government. The funding, the powers and the remit of the agencies are all to be determined by Ministers but that is not declared in the Bill. That is all to be done later.
What about the cost? Research has been undertaken for Transport 2000 by researchers who were previously employed by the Government in another transport field, so I suppose that their findings must be reasonably authentic. They reached the conclusion that the net cost of operating the railways will increase by 15 per cent; that is, by some £500 million, even taking into account the net savings and the extra revenue generated by the private sector. Is it worth the risk? I should like to know what the Government say about that because it was not mentioned in the speech that we have just heard. What will it cost in the Government's view? How will the availability of subsidies be affected? What will be the impact on fares and on closures?
I turn now to the question of network benefits, discounted through tickets, railcards having national validity, seat reservation systems, information services and so on. Those are extremely important matters. Eighty per cent. of all rail journeys are undertaken using discounted fares and in the new system 50 per cent. or so of journeys will involve travel on more than one operator's train.
Initially, the Government resisted any statutory protection for those benefits except for people with disabilities. They said that it could all be left to the commercial judgment of the operators. However, we are now promised amendments to maintain some of the benefits, perhaps for senior citizens and young people but not for the family railcard. There are no very clear assurances, apart from an undertaking to resign on the part of Mr. Norris, if the Travelcard is not preserved. I wonder whether this Minister will resign if those benefits are not fully protected.
I warn the Government that on these Benches we shall scrutinise their amendments with great care, recognising their temptation to minimise statutory provision for those benefits lest they operate as disincentives to the operators. It is not fanciful to say that because the Department of Transport's own document issued only a few weeks ago— it was leaked —stated:The most likely scenario is that the existing Travelcard will disappear and it will be some years before operators are prepared to agree amongst themselves that some kind of successor is needed".That is what the Department of Transport's own leaked document said.
1438 These are the questions that I wish to ask the Minister. Will the Government insist that benefits will relate only to full fare through tickets? We know that operators operating their own services may perhaps have an incentive to provide discount fares, but what incentive will there be to provide those discount fares to other operators' stations? Looking at the precedent set by the bus services, which did not figure markedly in the Minister's recital of successful privatised industries, we know that following deregulation travel cards massively declined. Only about one-quarter of the bus operators seemed to accept each other's tickets. They do not see it as being in their commercial interests so to do. Therefore, we shall press for the Secretary of State, the franchising director and the regulator to ensure that the complete range of through tickets and other benefits, all of which are much prized by their users, will be maintained.
We shall concentrate also on investment when we scrutinise the Bill. What long-term framework for investment is to be put in place? The Minister said nothing about that. What faith is there in a government who slashed the grant to British Rail's loss-making services by 23 per cent. and allowed investment in the existing railway system to decline to the lowest level since 1948 with further plans to halve railway spending over the next three years? All that has put and is putting the railway equipment manufacturing industry at grave risk. There is a dearth in orders for railway equipment compounded by the uncertainties promoted by the Bill. It is no wonder that people in York are deeply worried.
Coupled with that, the Government have been content to see fare rises. The worst of those have been on Network SouthEast for London commuters at more than double the rate of inflation. That was all to ripen the railways for privatisation and deregulation. That is not just my view; it is the view of the commuter groups, the Capital Transport Campaign and consumer and local authority groups. Today, London commuters already pay well over twice the European average. It all amounts to a disincentive to use the railways and public transport in favour of cars— that means more congestion, more pollution and much diminished prospects of the Government's undertakings to reduce the already high level of pollutant gases.
So far as concerns franchising, nothing could be more ludicrous than forbidding British Rail to compete for franchises. The Government concede that other European state railways will be able to do so, but not British Rail. They refuse to acknowledge that BR could provide a bench-mark against which services to be provided by all those private operators that are queueing to offer those services could be judged. It is also wholly inconsistent with the Government's own self-proclaimed philosophy that the public sector should be tested against private contractors, and vice versa. Even the present Government have never debarred local authorities and public contractors from compulsory competitive tendering under the Local Government Act 1988. It has been tried and actually the public service has come very well out of those operations.
1439 I should like to say a word about pensions. The Minister was very reassuring in that respect. However, our anxieties, which simply mirror those of people outside, are not yet allayed. The trouble is that the problems have arisen from the Government's own doing. In January they produced a consultation document advancing one option for discussion which permitted the Government to take over a share of the fund in consideration for which the state would assume responsibility for railways pensions. That would produce a windfall of about £4.25 billion for the Treasury —not unhelpful in mitigating the largely self-inflicted PSBR disaster. However, the Government say that they are now rethinking the whole matter; but it was the Government that put forward the idea.
We shall seek to insist upon the following: we want to protect the pensions rights of retired former BR and existing employees; we want to safeguard the assets and surpluses of the BR pension fund; we want to secure full parliamentary accountability as part of the Secretary of State's duties in pensions matters, together with the rights of trustees; and we want to create a living pension fund for all present and future railway industry employees on the basis of the existing BR scheme. Those are the criteria against which we shall judge what the Government say.
We are not satisfied with the Government's assertions about safety. Again, I do not have time to go into that aspect today. However, it is something at which we shall look with great care.
The burden of proof to substantiate the value to the nation of proceeding with the proposals rests fairly and squarely on the Government. It falls on them to establish that the new system will work and that it will work efficiently. I submit that they have hopelessly failed so far to discharge that burden. Nothing the Minister said today has helped them to do so.
§ 3.53 p.m.
§ Lord Rodgers of Quarry Bank
My Lords, I find this to be an arid and confusing Bill. The poverty of its substance is hidden by size. It is quite a good rule that a big Bill is often a bad one. That is certainly the case in this instance. The Bill is muddled in its underlying principles and thoroughly untidy in its practical application of them. Overall, there is no sign of any understanding whatever of the role of the railways as part of a public transport system and, indeed, of the role of public transport in a balanced transport policy. I disagree totally with the Minister when he leads us to believe that it is a privatisation Bill like any other. Irrespective of whether or not we approved of those Bills, this is a different measure altogether. It is a question for argument whether it represents genuine privatisation.
I first met the present Secretary of State during the course of a rail journey between Berwick-upon-Tweed and Newcastle upon Tyne over 20 years ago. He made it a very pleasant journey. I found him to be a man of liberal instincts and full of common sense. I can only believe that it is the current byzantine state of the Conservative Party which has distorted his judgment 1440 and has obliged him to bring forward the Bill, first in another place and now in your Lordships' House. I believe that he and his colleagues will come to regret it. It is a political disaster and it will not work. On present form, we cannot rule out a personal Statement by Mr. MacGregor at an early date in another place.
We are left with a Bill so fundamentally flawed that, although I am. sure your Lordships will try very hard to make it better, it is likely to become worse if amended in Committee. It will lose whatever logic—however perverted that logic may have been—which originally, in the first instance, inspired it.
We are all aware of the danger of seductive romance in the railways. Therefore, perhaps I ought to say something that any one of at least six former transport Ministers present today in the Chamber may say, including the noble Lord, Lord Boyd-Carpenter, who was, I believe, Minister of Transport almost 40 years ago. Despite the romance of the railways, which catches us all from time to time and makes us a little soft hearted, I certainly want to see an efficient cost-effective system which will lead us into the next century and beyond. We cannot deny, although sometimes instinctively we do, that we live in the age of the motor vehicle. We cannot expect the railway to be restored to its position of a century ago.
At the time of the publication of the Beeching Report 30 years ago, I found myself rather in the position of the man in a Bateman cartoon. As a Member of Parliament in another place, I dared admit that there was something to be said for it. It was wrong in the extent of the cuts that it proposed; it was wrong in many particulars; and it was also wrong in taking a short-term view. However, I entirely agreed—and, indeed, said so at the time, to my peril—that it was necessary to take a hard look at our railway system and to concentrate resources on modernisation where it was most needed.
Finally, in order to establish my credentials for criticism, perhaps I may add that, as Secretary of State, I certainly found an excessive suspicion of change— I put it no higher —on the part of much of the management and all of the trade unions at the time. But, despite those matters, I endorse what the noble Lord, Lord Clinton-Davis, said. There is much in our railways today of which we can be proud. Of course we complain, and we are right to do so. We should complain if our trains are late, are cancelled, are dirty or are impossibly crowded. Indeed, the public should complain if some of the staff with whom they come into contact are perhaps less willing to help and less friendly than those we tend to find in our local supermarket. At some levels, staff are still enmeshed in problems of procedure and still loathe change.
Anyone who has had ministerial responsibility in such matters has to say that the trade unions are not always models of co-operation and seldom allies in change. Yet, despite those factors—which I believe we must readily admit—we have a great deal about which to be pleased in the railways today. We have our personal preferences. I refer to the East Coast route which, when I first knew it many years ago, used to get me to Stockton-on-Tees in up to five-and-a-half hours and now gets me there in three hours.
1441 I welcome the development of urban rail services and their flexibility. It is also good news that we now have ThamesLink and that there have been improvements to our railway stations, including the magnificent reconstruction of Liverpool Street. Moreover, we have imaginative, although sometimes difficult to understand, fare structures, and much better marketing. I have to say, however, that I still do not like being called a customer. I much prefer to be called a passenger on the railways.
Of course, the grass is greener on the other side. But, by the Government's own account—the Minister said this today —there have been impressive rises in productivity in recent years, particularly in the past five or 10 years. In my view it would have been wise to build on that increase in productivity and particularly to allow the new regime of business-led profit centres to show its mettle. That would have been the first and wisest course to follow.
I would have gone further and given the private sector more scope to tender for some of the maintenance and renewal of infrastructure services at present carried out in-house. That would have been one way of introducing a much larger private element into the public sector. I would not have complained either if Ministers had kept up pressure for change and for better performance. Indeed, that approach would have been my alternative, building on the changes which we have already seen.
If that approach was not attractive to the Government, there were others available to them. All of us, for a moment perhaps, had a sentimental thought about restoring the old, much loved railway companies. As the noble Lord, Lord Clinton-Davis, suggested, we might have wistfully supposed that to be the solution. But despite being the Prime Minister's own suggestion, it soon disappeared without trace. It would nevertheless have commanded a degree of public support. If privatisation had been in the form of the LMS, LNER, GWR and Southern Railways, perhaps with a dowry, I am not promising that noble Lords on this side of the House would have supported the legislation but they would have seen greater logic in it.
I am not recommending this next course, but the Government might have released British Rail from its obligations on closures and from the necessity for the Government to consent to them. The Government could have taken the pressure off British Rail as regards fares. Every Secretary of State has occasionally summoned the chairman of British Rail, and without giving him any direct instruction, has hinted that rail fares ought not to rise or ought not to rise to the extent that British Rail preferred. It would have been possible for the Government to remove those pressures on the railways board and for the the board to be told to conduct its business on the same lines as any other business. That at least would have been a logical way of allowing the disciplines of the market to rule.
There is another way in which the disciplines of the market could have been allowed to play their part. Useful interim steps could have been taken such as removing subsidies to long distance commuters— 1442 those subsidies often apply on InterCity routes—particularly as regards season ticket holders. Certainly, there is no good reason— if the market is to determine these things— why those who live and work in London and elsewhere should subsidise those who choose cheaper housing and a higher quality of life in Norwich, Salisbury or the Cotswolds. That would have been a logical course for this Government to follow: it is however one of several courses that they rejected.
We are left with a Bill which will be a paradise for lawyers and accountants and which is certain to be amended in the next five years. The Bill will involve more and not fewer civil servants in its administration and will lead to political and not management decisions being taken over important issues. And it will not improve life for the travelling public. Nor will it improve Britain's economy. This is not a formula for stability. If changes had to occur, there was much to be said for obtaining a much larger measure of consent than this Bill now commands.
The Government are dealing in this legislation with a highly integrated system—track and vehicles, given modern technology, coming much closer together. They are dealing with a highly subsidised industry, which will remain so. All the arguments were in favour of keeping the industry together and not breaking it up. I remember when I was responsible for the railways that my officials in the Department of Transport, who were often talented people, spent a great deal of time monitoring and second-guessing the work of British Rail. In turn Treasury civil servants monitored and second-guessed the work of my department. But henceforth the distinguished and talented civil servants in the Department of Transport will be monitoring and second-guessing Railtrack, the regulator, the franchising director and the residual British Rail. The Treasury will be monitoring and second-guessing the Department of Transport as it monitors and second-guesses Railtrack, the regulator, the franchising director and the residual British Rail. Each will be monitoring and second-guessing each other.
That is a ridiculous situation. I find it difficult to understand why Ministers, to whom I am frequently prepared to give the benefit of the doubt, should have brought such a totally unsatisfactory Bill before this House. The Bill proposes the dismemberment of a highly integrated transport system when, as I said, technology ought to be bringing it closer together. It is an ill thought out mixture of privatisation and regulation of a system that will remain highly subsidised. The outcome will be waste, frustration, bureaucracy and perhaps a few quick profits for the lucky ones. It is a mistake for which not only the Government but also Britain and the travelling public as a whole will pay.
§ 4.6 p.m.
§ Lord Marsh
My Lords, the noble Lord, Lord Rodgers, expressed the fear that amending the Bill might distort its logic. I beg him not to spend too much time worrying about that or searching for the object of his concern. I followed his speech closely and 1443 I agreed with almost everything he said, but as an old friend I also beg him not to fall for the romantic nonsense of the old railway companies. Their industrial relations were appalling and many of the practices we have today stem directly from employers who even managed to invent the Labour Party as the only way their employees could see out of their appalling predicaments. They were not even particularly good managers because not one of those companies was financially viable.
It says a great deal about the origins of this Bill that it is where ministerial thinking on this issue began. Even the Prime Minister, who I think is an able chap, and the present Secretary of State for Transport—many people believe he is probably a Labour Party mole in deep cover—were taken up with the fantasy world of "Brief Encounter" and Tubby the odd job engine. But at least for the past four years the Government have tried, with all the massive resources at their disposal, to find a sensible and efficient way to privatise the rail network. The extent of their failure is embarrassing. Although it has only 7 per cent. of the passenger market and 10 per cent. of the freight market, British Rail is seen by the Government as an unacceptable monopoly which has to be broken up next year almost at any cost. Yet we have no idea, even at this late stage, how it will all work out.
Not surprisingly the potential bidders for the railways are not wildly enthusiastic. A year or so ago the Government's banking advisers did a fantastic job in getting a lot of people interested in the railways. That was a mistake. If they had interested fewer people they might have been able to have another bite at the cherry, because all of the first lot are now pretty disenchanted.
Let us consider a few of the comments they have made. Richard Branson expressed interest in the London to Edinburgh route. He now says that he is not interested except as part of a consortium. When General Electric was asked for its views it replied: "It's too early to say". Mr. James Sherwood of Sea Containers, another prominent name, said that he is against any obligation to run loss-making services or any statutory investment requirements. I understand him, but it is a significant reason for not wanting to become tied up. The managing director of Sally Line said:We would only be interested in a south-east franchise but it is difficult to read and we probably won't enter".Within the past couple of weeks the finance director of National Express summed up the present state of play when he said:We are looking at rail privatisation closely, but it is not clear how it will work. The Government make statements, for example, on the need for Railtrack to make an economic return. That conflicts with other aims, such as making the operating franchises attractive.A senior banker—who for reasons I do not fully understand did not wish to be named—has been quoted as saying that there would be very few bidders. However, we know that every cloud has a silver lining. He went on to say: 1444The government will probably have to give it away. There is the prospect of extra capital gains, asset-stripping and a reasonably stable profit flow in the short term. You have a duty to go for it, but I don't want to hang around with it".That is a perfectly sensible and defensible position from his point of view. However, I would be concerned if the Government were not slightly worried about people having such a view.
If those had been the views of major potential investors at this stage in the proceedings of any other privatisation Bill, the issue would have been aborted. If it had not been, if they had pushed out a prospectus with that degree of optimism the Minister, and probably the entire railway department, would have found themselves doing time in Ford open prison.
Aborting the proposal at that stage was exactly what happened to the original idea of selling British Rail as a single unit, because Ministers finally realised that British Rail is fundamentally different from any of the other state industries. That has nothing whatever to do with emotion. I was sorry to hear the noble Earl make the similarity between the two his first argument. I have great respect for the Minister. Having been a junior Minister myself and having had to speak arrant nonsense from the Dispatch Box, of which I did not believe a word, I understand his problem. We share the same railway station on windy mornings in the winter. However, that is a serious point, because if the Government still do not understand that, it will not be possible to legislate sensibly in this area.
What are the key features which make British Rail uniquely difficult to privatise? This is one of those issues where there is good news and bad news. I shall begin with the good news. Railways are very simple. Unlike British Telecom or an airline, they do not deal with international regulations, they do not push at the frontiers of science; they are organised on the basis of large metal boxes with wheels, about which we know a great deal, on fixed track, and they have been running for 150 years. We know a great deal about railways. As a result, it is relatively easy to provide any Minister who is interested—and it has been a major problem, for both parties in a number of Administrations, to find a Minister who was faintly interested— with a whole menu of different shapes and sizes of railway from which the Government could choose. They can be big ones or little ones. They can be state-of-the-art railways or conventional railways. The only thing they cannot be is cheap.
That brings me to the bad news. The bad news is that, to the best of my knowledge, no passenger railway system in the world breaks even. British Rail has not been financially viable for at least the past 60 years on any commercial basis. Nor were its predecessors. I put it to the House that that cannot be coincidence. Different governments in different countries, and different railway administrations in different countries have addressed the problem. If there was some simple way of meeting that particular embarrassment, somebody somewhere would have discovered it by now. Unless the Government's objective is simply to get rid of the problem regardless of the effect—and that may be their objective, albeit 1445 unspoken—if they believe that this Bill will produce the first truly profitable railway system in the world, that is a nonsense.
There are reasons why that is so. The argument is not based on emotion but on certain specific features of passenger railway systems. Nearly 50 per cent. of the cost is in the track, which has to be paid for by the user. Unlike buses and aircraft, there is no secondary market. In his opening speech the Minister mentioned an attempt to produce a secondary market, but that is purely an alternative to British Rail's ability at present to pass some rail stock on to other sections of the network. There is not and can never can be a secondary market for railway rolling stock because it will not fit on anybody else's railway. That is a very real difference compared with airlines, which can sell aircraft which are 40 and 50 years old, and buses, which are sold all over the world.
Unlike buses or aircraft— which are always used as the answer— which can go under, over or round other traffic, railways cannot stray from the fixed track. They therefore require a network of track, which is a fixed cost impossible to escape without incurring even greater expense. Again, unlike buses and aircraft, because of the age of the system, in addition to running a railway the system has to maintain 40,000 Victorian bridges, tunnels and viaducts, 125 miles of Victorian sea walls and more than 1,000 listed buildings. Those are not features of British Airways or the National Bus Company. They are unique to the railway.
Therefore, why do Ministers persist in an experiment which is unique to this country and unique to this Government? The first argument, if one uses that word loosely, is simple in the extreme. I am saddened that it was used as the opening argument today. If I give it in all its complexity and subtlety it is: British Airways, British Gas and British Telecom have been successfully privatised; ipso facto the privatisation of British Rail will be successful.
I have spent some time trying to explain why I believe that argument to be total nonsense. I now turn to what seems to be the main argument—the lack of confidence on the part of the Government in the style and competence of British Rail's management. They say that it has produced a culture which cannot be changed in any other way. I find that argument extraordinary. It completely ignores the Minister's powers over board appointments. He appoints and therefore can fire the chairman, the chief executive and the senior executives responsible for finance and planning, group services, engineering, operations and safety.
If the management of British Rail is the key problem— and I do not think it is—rather than go through all that expensive upheaval, why does not the Minister change those of his appointees he believes not to be up to the job? He is unlikely to get better ones from industries which have never had any connection with the railway industry, but at least it would he more scientific than throwing the whole system into the melting pot and hoping that something unspecified but better emerges.
1446 However, does all that matter? There is a view that the railway is not worth keeping at anything like its present size. I believe that view to be profoundly wrong. I long ago became highly sceptical about cost/benefit analysis, but it really would be disastrous to ignore the economic cost of road congestion and the role which railway investment can play in its containment and to some extent its reduction.
We talk in this House a great deal about our competitive position in Europe. The noble Lord, Lord Clinton-Davis, touched on that in passing. It is generally accepted within Europe that transport accounts for about 15 per cent. of the total cost of finished, manufactured goods. Against that figure of 15 per cent. of the total cost, let us compare UK rail investment per head of population with that of our main European industrial competitors—Germany, France and Italy. If we measure it on a dollar per head basis, in the UK we invested just under seven dollars per head. In Germany, it was three-and-a-half times as much at 24 dollars a head; in France, it was five times more than the UK at 37 dollars per head; in Italy, it was seven times more at 50 dollars per head.
Clearly, our European competitors take a fundamentally different view from us about the economic value of rail investment. I do not believe that there is any evidence which demonstrates that they are abysmally wrong and mistaken in what they are doing and that we are so far ahead of the Germans, the French and the Italians that we can treat it as a joke.
The problems which face British Rail are not problems of line management; nor are they problems of public versus private ownership. The problem is the price we pay for a succession of governments who have refused, at great cost to the nation, to provide clear and attainable objectives or any kind of consistent investment programme.
This is a bad Bill, but, with a more open mind on the part of the Government in Committee, it could probably be made to work. I am a great believer in the old Marxist slogan that all problems have the seeds of their solution within them. It does not always work out, but alternatively, if the Government persist in this exercise in what can only be described as primitive dogma, outdated in every other part of the House, they will, of course, have their way. If that happens, they will pay a heavy political price, and rightly so. If that happens, as always, it will be the nation which will pay the full costs for many years to come.
§ 4.23 p.m.
§ Lord Boyd-Carpenter
My Lords, perhaps I may first join the noble Lord, Lord Clinton-Davis, in expressing my sadness and, from these Benches, our sadness, at the absence of Lord Underhill, for whom we all had a very affectionate regard. I express the hope that the memorial meeting for him this afternoon will be worthy of a lovable, able and powerful man.
The question with which we have to deal this afternoon is difficult. I was a Member of another place in 1948 when the Bill was carried through to nationalise our railway system. I am glad to say that, although I do not look back on many of my past 1447 speeches with particular pleasure, on that occasion I prophesied that it would be a disastrous measure, and a disastrous measure it has proved. It is with the inheritance of that legislation on the nationalisation of the railway system that the present Government have to deal.
What the Government should do is obviously a difficult question. It is obvious, and has been made even more obvious from the earlier part of the debate, that real problems arise in dealing with the existing situation. That situation, I stress, was not created by the present Government, nor by the Conservative Party; the Government inherited it. It would have been easier, if they had been less resolute, just to let it be and to let the railway system continue, with all the defects and faults which have been outlined by noble Lords opposite already in this debate, with the low percentage of goods carried as rail freight, the falling number of passengers and the general weakness of the system.
It is, therefore, much to the Government's credit that they have had the courage to face what is obviously a difficult situation, a problem where no remedies are plain and where it will be necessary to show great courage and determination in legislating to improve matters. I very much welcome the display of resolution and hope that the Government will be quite resolute in pressing ahead with the measure, accepting, if necessary, amendments that are shown to be right, but maintaining the main structure of the Bill.
The main structure is, after all, aimed at— to use a rather ugly word— privatisation and ending the period of a nationalised railway system. One of the strong arguments for privatisation, both in this case and in the case of other activities which in the past have been privatised, is this. If one works in a state-owned industry, one has no reason to accept or believe that one's earnings will depend on service to the public and the public's willingness to pay for it. One is secure in the sense that one is remunerated, regardless of whether the public is satisfied or attracted or whether public sales are built up. As a result, one has quite a different approach from that in an industry where one knows that it is only by gratifying and serving the public, giving it what it wants, that one will obtain one's earnings. There is a profound psychological difference.
We have seen that with British Rail, as the years have passed. I cast no reflection on the staff of British Rail who are an admirable lot and in many ways responsible and hard working. But the fact remains that they know, from the top to the bottom, that their earnings and remuneration do not depend on gratifying the public— giving the public what it wants by serving it.
The result has only too easily to be seen by those of us who travel. Perhaps I may quote two small personal examples. First, I use Paddington Station fairly regularly, and, as some noble Lords will know, there is a vast open space of white marble, with hardly a chair on it, where we assemble to wait for our train. "Wait for our train" is the operative phrase because an 1448 announcement is never put up as to which platform the train will go from until about two or three minutes before it is due to start. One stands on that great concourse. I hope that what I am about to say will not be regarded as indelicate, but there is such extraordinary disregard for the comfort of individuals that the gentlemen's latrines are entered only on payment of 20 pence— a complete disregard for the comfort of certain individuals if one has to wait for a train, as one often does, for a very long time.
Another example from memory is of a train on which I travelled from North Wales a couple of years ago. It was scheduled to go into Euston. Without any advance warning, or any warning until we were already two hours late, we were told that we were not going into Euston but into St. Pancras. No one had bothered to tell St. Pancras that. When the train entered St. Pancras there was not a porter or an individual to be seen; there was not a trolley to be seen nor any indication of where a taxi could be obtained. I am sure that many of your Lordships can quote heaps of such examples. They contrast very much with what is to be found in other systems of transport.
The airlines— I have some experience of them— do not treat their passengers in that inconsiderate way. Nor do the coach companies. It is of the essence, not of any human defect but of a defect in the system, that if one has a state-owned, nationalised system, as the years go by it increasingly ceases to have regard to the interests, the wishes, the tastes and the comfort of its customers. That again is a powerful argument for bringing the present system to a conclusion.
There are many other arguments in favour of doing so. There is the argument which has already been adduced: that far too little freight is now carried by rail and far too much on the road. Indeed, one of the noble Lords who has already spoken has pointed out that the actual amount of rail-carried freight has fallen in recent years. There is the general weakness of the system in that way. It is a very considerable argument in favour of changing the system.
It is important that we should introduce into our rail system a new attitude of mind among those operating it— an attitude of going all out to get custom, to give the public what the public want, and to secure that that service, whether in the carriage of freight or of passengers, is provided in the way that the public want.
Whether the Bill as it stands will precisely and fully serve that purpose is a matter of very legitimate argument. I concede that at once. However, that a substantial change is needed from the system of state ownership is overwhelmingly borne out by the state of the industry. It is very important indeed that we should understand that. Therefore when we discuss the long, detailed, complicated Bill, we should have that very much in mind.
It will be a complicated Bill. It will be a difficult and complicated Committee stage. I do not believe that any of us need have any illusions about that. On that point I should like to say to the Minister that I very much hope that it is not the Government's intention to pursue most of the discussion of the Committee stage in the watches of the night. I commend to him the fact 1449 that there is a day called Friday and that it is at least physically possible for your Lordships' House to meet, as it used to meet, regularly on Fridays during daylight hours for the proper discussion in particular of complicated Committee stages. Without wishing to waste further time on the point, I am quite sure that the arrangement of business in your Lordships' House latterly has failed to give due weight to that. We have spent unnecessary time in the watches of the night while the Fridays have been allowed to go by, week after week, without being used. I hope that my noble friend in charge of the Bill will exercise his considerable authority and that if the government business managers suggest late sittings, he will insist, on the contrary, on full debates on Fridays from perhaps 11 o'clock in the morning (which is the normal time of sitting on a Friday) until six o'clock or seven o'clock, or at any rate until the late afternoon. I urge that upon him because it is important that the Bill should be properly and fully discussed.
I listened to the speeches from the other side and, if I may say so, without presumption and impertinence, there is obviously a certain amount in them. I am sorry that that remark caused such surprise. The modesty of the noble Baroness, Lady Hollis, in indicating surprise at that is very touching. But in fact there are serious points to be discussed and the noble Lord, Lord Clinton-Davis, knows that, apart from his happy party political controversy. I hope that we shall have the opportunity of discussing the Bill carefully and fully because it is important. I believe that we are deciding on the structure of our railway system for many years to come. It is a decisive moment in the history of that system which is so enormously important to us in this country. It is surely necessary that we should get it right. I have sufficient confidence and admiration for your Lordships' House to believe that we are much better equipped, if we are given the chance to discuss it properly, to get the matter right, than is any other organisation of government.
Finally, I hope that weight will be given to the fact that with privatisation, private investment will be possible in the railway system. One cannot have private investment in a state owned industry. One cannot have private investment in a nationalised industry. Therefore if one is to move over to investment from the private sector, one has to move the organisation into the private sector. That is proposed, somewhat laboriously and highly complicatedly, in the Bill. However, it will enable a new source of funds to supply the manifest needs for investment in our railway system. I believe that if your Lordships and the Government between them can get the matter right, they shall take a major step in favour of the strength of the British economy by giving us the efficient railway system that we have lacked for so many years.
§ 4.37 p.m.
§ Lord Eatwell
My Lords, I wish to concentrate on the relationship between the proposals in the Bill and the future of investment in the railways, a subject touched on at the end of his speech by the noble Lord, Lord Boyd-Carpenter. However, I apologise in 1450 advance to the House for the fact that I shall not be present at the conclusion of the debate because I have a long-standing engagement elsewhere.
The Government have argued that their plans for the railways will lead to a significant increase in the quality of rail services. Everyone knows that the key to quality in rail services is investment— investment in better rolling stock, in better track, signalling and the general rail infrastructure. Most of the failures and frustrations associated with the operation of British Rail are a function of a lack of investment. On those lines which have been modernised in recent years service is typically very good indeed. It is on those lines which have been neglected that the horror stories abound.
Therefore, the fundamental criteria by which the Bill needs to be judged, are these. First, will it lead to a significant increase in the volume of investment in rolling stock and infrastructure? Secondly, does it provide the right incentives to encourage investment in the modernisation of assets which typically must be amortised over 25 to 30 years? Thirdly, does it provide for the co-ordination of investment decisions, which is vital when dealing with such a long time horizon?
In addressing those questions there seems to be no understanding on the part of the Government of either the vital importance of investment for the future of the railways or the criteria which any sensibly run business would apply to such investment. On 25th May this year in another place the Secretary of State for Transport declared with some pride that the overall interest charge on the accumulated debt of British Rail was £81 million a year, whereas the accumulated interest charge on the debt of SNCF to the French taxpayer is £1.3 billion a year.
That was a matter in which the Secretary of State took pride. He should have been deeply ashamed, for he was simply acknowledging the failure to invest in British Rail on anything like the scale of investment there is in French railways. As any sensible businessman knows, the interest charge is simply the counterpart of borrowing for long-term investment. No successful business, particularly a highly capital intensive business like the railways, can be efficiently run if all the investment must be financed out of current receipts and the cost not spread over a number of years by borrowing. That is what the French have done and their investment is beginning to pay substantial dividends as the TGV network starts to generate profits.
What have the French got for their £1.3 billion a year? For the same amount of money that this Government spend every fortnight on unemployment benefit the French have captured the lead not only in the railways but in the provision of rail equipment. French designs and French equipment are now being sought all over the world. Moreover, the French investment in the TGV has rejuvenated the regions of France. When the Channel Tunnel opens, French TGVs will speed to the tunnel direct from 15 French provincial cities at over 150 miles per hour. On the other side, to our national shame, trains will totter up to a single destination in London at, if they are lucky, 60 miles per hour.
1451 The example of investment in the TGV should also teach us another lesson; namely, that technical advance in rolling stock cannot be meaningfully separated from technical advance in infrastructure. They are inextricably linked. For example, there is no point at all in building rolling stock which can travel at very high speeds if there is not the quality of track and efficiency of signalling which will permit those high speeds to be attained. Yet the fragmented structure for the rail industry that is proposed in the Bill will not only militate against the co-ordination of investment in infrastructure and rolling stock, it will also create no incentive whatsoever for the heavy investment programme in infrastructure, particularly in signalling, which the industry desperately needs today.
The responsibility for investment in infrastructure will lie with Railtrack. The Government have provided no information about the way in which the investment strategy of Railtrack will be determined other than to say that the company will be expected to cover the costs of its investment from the fees which are charged to track users—a highly inefficient approach. What are to be the borrowing powers of Railtrack? Will it still be subject to the Government's external financing limits? More importantly, what will be the incentive for Railtrack, the monopoly provider of infrastructure, to invest at all? After all, it is not responsible for running the services or directly responsible to the passengers at all.
It is notable that in the case of Swedish railways, where a similar separation between the responsibility for track and the responsibility for services has taken place, the separation was preceded by an extensive programme of infrastructure investment. The Swedish Government have assumed responsibility for ensuring that a high level of infrastructure investment is maintained and they subsidise long-term track investment. Nothing comparable is planned here. Not only does the fragmentation of the industry militate against any coherent investment strategy in infrastructure, it also seriously endangers any coherent purchasing strategy for rolling stock by the franchise holders, with all the economies of scale that a long-term coherent buying strategy could bring.
In the process of discussing the Bill in another place, the Government have been struggling to create an environment for investment in rolling stock by steadily rowing back from their rhetoric about consumer choice. I was rather surprised to hear the Minister refer to consumer choice today. The Government have been forced to recognise that long-term investment strategies by franchise holders are incompatible with the Government's professed devotion to free access. So in the Independent newspaper earlier this year, the Secretary of State told us that the Government will allow what are euphemistically called "exclusive franchises"—in other words, monopolies—to appear on specific lines to facilitate investment.
It is not only the long-term proposals for investment in rolling stock which are defective. Provision of rolling stock today is blighted by the 1452 uncertainty created by the Bill and therefore the inability of British Rail to make medium or long-term investment plans. Just last Monday 900 engineering workers in York, Derby and Crewe were made redundant by ABB (the former BREL), Britain's largest manufacturer of rolling stock. That announcement was made just three months after ABB had declared that altogether 3,500 jobs were at risk through shortages of orders for rolling stock. The truth is that the Bill has eliminated any semblance of investment planning for rolling stock investment and has shattered confidence in the supply industries. Those redundancies and the further decline of Britain's rail engineering industries are the direct responsibility of the Government and this Bill.
It is clear that when at last the time comes to reorder rolling stock and get investment going again, perhaps in 10 years' time or so, whether for British Rail or for the new franchisees, buyers will look abroad to buy off-the-shelf packages rather than wait around for British production lines to restart. Once again, under this Government, indigenous manufacturing and export industries will have been undermined and the balance of payments weakened. Once again the policies of this Government have contributed directly to the erosion of the skills and productive base of British manufacturing industry.
The Transport Select Committee in another place, in its report published on 27th April, presented detailed recommendations to overcome weaknesses in the Bill, which is so biased against investment. A theme which runs throughout those recommendations of the Select Committee is the need to co-ordinate investment plans between Railtrack, the franchise holders and the residual activities of British Rail. That co-ordination is fundamental to the future of investment in the railways. Yet the Government persist in treating it in a vague, off-hand manner.
There is one organisation with the experience and expertise to perform the task of investment co-ordination. That is British Rail. But, as we all know, that is the one organisation that will not be allowed to do the job. If there is one dominant characteristic of the Bill, other than a total lack of long-term thinking, it is hostility to British Rail. That is particularly evident in the bizarre fact that British Rail will not be allowed to bid for franchises, a subject that I am sure will be covered extensively in Committee.
However, I wish to pick up one point on that topic from the proceedings in another place. While desperately trying to defend his decision not to allow British Rail to bid for franchises, the Secretary of State declared that BR would have an unfair advantage. It is worth quoting his argument in full. He said:If BR were to bid … it would always tend to make the most optimistic assumptions, believing that, if its forecasts proved unrealistic, somehow or other the taxpayer would be there in the background to bail it out".— [Official Report, Commons, 25/5/93; col. 786.]That statement by the Secretary of State raises an interesting question. Suppose that a franchisee makes a bid on overly optimistic assumptions and subsequently finds that it can no longer operate its 1453 franchise; what will happen then? Will the service simply close? Will BR be expected to step in to clear up the mess? We have had the answer from the Minister. There will he something called a Railway Administration Order ensuring that services will be maintained; in other words, the taxpayer will pick up the tab. The Secretary of State's approach is yet another example of the muddled thinking evident throughout the proposals in the Bill.
There is clearly a strong economic case for substantial investment in our railways. There is a strong case which the Labour Party has been putting forward for some time, as my noble friend Lord Clinton-Davis pointed out, for private sector involvement in British Rail's investment programme. But that should take place within the coherent, co-ordinated framework of maintaining the integrity of the national system, creating a secure, long-term basis for investment. The proposals before us will do nothing to achieve those objectives.
§ 4.51 p.m.
§ Lord Redesdale
My Lords, I feel qualified to speak on this issue because the Bill is so broad and based on so many assumptions that most people could take a wild stab at it and probably hit a potentially disastrous problem.
I start by making it clear that I am not averse to the concept of privatisation. There have been some notable privatisation success stories, such as that of the electricity industry. However, the Bill will not, as the Title suggests, lead to the immediate privatisation of British Rail. In fact, it leaves most of the system in the hands of the Government, which means that the Government will retain the ability to intervene in the franchised railway system, arguably to a greater extent than they are at present able to do in British Rail.
In the past privatisations have been popular with the public. It was possible for the Government to ensure that a lot of people made a profit— that was especially the case with British Telecom— by deliberately undervaluing the share price. In my opinion, that profit was made at the expense of the country which, after all, owned the asset.
The privatisations that have taken place were politically safe. It was never even considered to be an issue that there should be a reduced telephone service or that areas of the country would no longer be supplied with gas, electricity or water. That is not the case with the limited privatisation of services on British Rail. It would be interesting to know how much of a bribe, in the form of subsidy, the Government are prepared to offer the private sector so that there will be enough potential franchisees to allow the privatisation to appear credible.
My main problem with the privatisation is not that there will be a reduction in the quality and quantity of services, which the Bill will make almost inevitable through cuts in labour costs leading to large scale job losses, but that a large number of unprofitable lines will close. I feel that Beeching would look kindly on the Bill.
There are two main aims behind the Bill. The first is to introduce competition into the rail system and so 1454 promote efficiency. The second is to attract investment so that the taxpayer will not be burdened to the same degree with the onerous direct responsibility of subsidising the rail transport systems that now exist. Both aims are entirely sensible, and I support them fully. However, I feel that there is little evidence that the Bill in its present format will achieve them.
The Bill is vague and relies heavily on the assumption that, as privatisation has worked in other industries, it is a foregone conclusion that this privatisation will be a resounding success. The Bill assumes that private companies will vie with one another for the opportunity not only to run the railway system, but that they will be prepared to make enormous financial commitments to the long-term future of the railway network. The limited interest of companies in becoming franchisees and the wide spread belief in the country and the business community that the Bill has little real credibility severely challenge that assumption.
Unless there is a significant increase in the number of companies willing to become franchisees, the first aim of the Bill— competition— will be called into question. I fail to see how competition will be generated if only one company bids for a line. British Rail has been denied the right to tender for the franchise of lines, although it is obvious that it would be the natural contender to act as a franchisee and could also act as a yardstick by which the bids of other companies were assessed. Do the Government really believe that a company that has had no experience of running the complex operations of a rail network, will automatically, by virtue of being a private company, be more efficient than British Rail? I do not believe that.
The concept that the new franchisees will be in a position to make large capital investments in the infrastructure of the network is also, I feel, inherently flawed. The rail network is inefficient largely because it has been consistently under funded. The road network has taken priority over the rail system for a long time. It is easy to blame British Rail for being inefficient, and I agree that innovation and new managerial practices can only be of benefit to the system. However, blaming management exclusively is to ignore the much larger and fundamental problem that the system itself needs massive amounts of capital investment. An example is the western line, which will need £800 million spent on the track and signalling infrastructure. The best management in the world will not improve the service until the system is upgraded.
The problem affects the entire rail network. Any improvement will take a considerable time. Is it reasonable to believe that the new rail companies will be able to invest heavily enough to upgrade the system? Considering that the number of passengers who actually use the system will not suddenly and dramatically increase, is it feasible to expect the money for capital investment to come from the new franchisee's fare box?
Passenger figures have been shown to be linked to the economy. I use the InterCity service between London to Newcastle quite regularly: it is quicker than taking my car or getting on a plane. However, I 1455 would not feel compelled to use the train system simply because it was run by a company other than British Rail. The only reason I would consider using trains more frequently would be price. Privatisation will not lower the prices to which companies will be forced to gear their ticket structure. It is obvious that without the benefit many lines receive through cross-subsidising within the system, many less popular lines will be forced to raise prices and it will be those lines that conceivably have to close.
The fact that the Government expect the new companies to make large contributions through the charges imposed by Railtrack will make many potential franchisees consider carefully before entering the market. Franchisees are already faced with a bewildering number of uncertainties regarding the operating costs of the system. How much will it cost them to run on individual lines? How long will their franchise term be? How much will the rental charges of the rolling stock account amount to?
With the paucity of information about running costs that is available at the moment, how much will it cost to run a line when the expensive rail cards and administration of through-ticketing are added? All those problems will have to be addressed before a realistic bid is tendered. In many cases bids will be dependent on the amount of subsidy available. The aim of the Government to reduce subsidies in the future will have to be taken into account by the franchisees, as will the eventual upheaval caused by the intended privatisation of Railtrack. Those major problems are the reason why at present there is little fervour for the Bill. It is also possible that many bidders will realistically aim for the amount of subsidy that they are able to achieve and, along with a reduction of their main unit cost— which is labour — run a railway that will make a profit but will also mean a rundown in national services. Privatisation in this format will cost the country financially. I do not believe that it will improve the quality of services.
The Bill is a piece of political dogma that has been forced through the other place with little consideration as to whether it makes any sense. Privatisation of British Rail can work in a number of formats, but it is unlikely that it will work in this context. For the majority of franchisees competition will not exist. Large-scale investment from the private sector is unlikely to materialise, and the most damning indication of the outcome of the Bill has already been provided by the recent job losses at ABB, as mentioned by the noble Lord, Lord Eatwell. The prospect of privatisation has stopped investment and orders for rolling stock and has cost 900 jobs. I strongly urge the Government to reconsider.
§ 5 p.m.
§ Lord Greenhill of Harrow
My Lords, there are many speakers and I will be very brief. The noble Lord's introduction was helpful and full and the speeches that we have already heard have covered the subject profoundly, and sometimes rather emotionally.
1456 My knowledge of the railway industry is out of date. For various reasons I thought it would be possible for me to play a small part in this debate. I believe I can claim a minor advantage from the experience of having spent four years as an apprentice on the London North Eastern Railway at a time when the grandfather of the noble Lord, Lord Whitelaw, was chairman. It was the era of silver jubilee expresses and the hard-pressed private enterprise railways. I suppose that those were what the noble Lord, Lord Marsh, referred to as the bad old days— I am not even sure that he was born then. But I can say that I experienced those times during the day and night at all levels and they were not bad old days. The loyalties of the railwaymen were to their industry, their company and their colleagues. In some areas the manning of the railways was practically a family affair. Obviously, we do not want to create such a situation but we must hope that any new organisation set up under the Bill will eventually command similar support from its staff.
I left the industry in 1945 and (as everyone should) I have maintained an interest in it, not least because its efficiency is vital to the economy and to all in this country both for business and pleasure. The Railways Bill that we are now considering is a very complex document and many points require clarification. In handling it I am reminded of handling the Maastricht Treaty in weight. But for the man in the street to understand it fully, White Papers, Select Committees and a long debate in the other place are not enough. A simplification document is highly desirable and more careful explanation must continuously be made to the public. The Government cannot be satisfied that the general public have grasped the important changes now foreshadowed, let alone approved them.
British Rail is not universally popular and is a familiar and ready target for criticism. To be a success these new plans, when finally approved— we hope with modifications — must have greater public support. The Bill proposes Railtrack as the core of the railway operation. Initially, it is to be a Government-owned company with privatisation hanging over it. Its leader has been chosen from the oil industry and is a most capable and enterprising man. I am relieved to know that his staff will come from existing trusted and tried railwaymen whose experience is equal to their great responsibilities.
The other vital part of the organisation is the franchising regime, about which I am much less happy. It is an experiment that for the most part must aim to attract the average passenger and as much freight traffic from roads as it can. There is obviously considerable scope for confusion and conflict between those two core organisations. The Government know the identity of the likely franchise holders. I do not believe that the general public know it; I certainly do not. But we hope that a regime of cowboys catering for expenses-paid passengers will be excluded. There is a real danger that the high costs will prejudice the more traditional service of the railway. The experiment must be made to succeed.
I have little doubt that Ministers are aware of the pitfalls and that their intentions are sincere, but the 1457 public must have more confidence in them. Confidence has not been fortified by the handling of the second London terminal for the Channel Tunnel service. The former Chancellor of the Exchequer spoke with finality about a proposed St. Pancras route without the practicability of the project having been fully tested. The matter is still far from settled. Doubts have followed delays. I know it is a very difficult subject, but we cannot afford delays. We were once the world's pioneers of the railway industry and much has been achieved in the past few years. However, vital time has been and is being wasted. The President of France may be justified in boasting about some of his trains that streak across Community-subsidised farmland, but overall achievement in this country for speedy travel is widespread and the volume of traffic is far greater than in France. In my view, the most important requirement is a vastly better explanation to the general public of what the Government hope to do in their interests. Without that, public support may well fail and ruin the whole proposal.
My final point concerns pensions. I understand from what has been said that this matter is being dealt with, but unless the problem of pensions is solved sympathetically the industrial relations of the whole organisation will be affected.
§ 5.8 p.m.
§ Lord Stodart of Leaston
My Lords, I may be the first speaker who has not been a Minister in charge of the Department of Transport, a director or an apprentice. However, I have been a passenger on the railway system for a very long time. It is nearly 70 years since, at a station just outside Edinburgh, I was put in charge of a friendly guard to take me to London at the half fare price of £1 3s 7½d. That is one of those totally useless statistics that for some reason has remained with me.
I am quite certain that the noble Lord, Lord Marsh, would say that it was a thoroughly unviable exercise. I cannot remember whether it was the London and North-Eastern or the North British Railway in those days, but to carry me for that price and also to provide a schoolboy with a five-course breakfast for a shilling can hardly have been the most profitable of exercises. However, perhaps it inculcated into me what I think exists in many of us— a considerable interest in, if not an affection for, the railway train.
It was in 1960 that I made my maiden speech in another place on a British Transport Commission Bill. That had been triggered by a journey that I had undertaken on the footplate of the "Flying Scotsman"— he new diesel, as it was then— from King's Cross to Newcastle. Under no circumstances, I was told, was I to bring overalls because that would insult the driver who was so proud of the cleanliness of his cabin. Then from Newcastle onwards a boiler suit was provided so that I could go on the footplate of a steam engine, where the dirt and dust were in marked contrast to the cleanliness, the ride rough compared with the totally smooth one—perpetual turmoil where there had been none before. But both of those engines were monuments to the skill and craftsmanship of the British engineering workshops. This week the comfort 1458 and the punctuality of the new 225 from Edinburgh to London would be quite impossible to criticise. Yes, much has been said about the rolling stock in France — the TGVs. I have travelled both by night and by day across France. I would say without hesitation that the comfort and accommodation, night or day, of the present British rolling stock is superior to that to be found on the Continent.
Before Dr. Beeching took out his axe I remember having a tour of the Scottish network to see just how hard the railway system and those in charge of it were trying to provide a cheaper but still efficient service. It may ring a bell with my noble friend on the Front Bench if I mention a place called Ballater and the experiment of running a battery car. It charged up at Aberdeen in order that it could go up the hill to Ballater and then it ran down to Aberdeen by gravity. It sounds slightly unlikely but it worked. There was another experiment between Gleneagles and Comrie which involved virtually a bus on the railway line which would stop wherever a passenger wished to get off and would stop where anyone wanted to get on. Both those efforts were popular while the novelty aspect lasted, after which the very fickle general public returned to their motor cars. It is, I believe, the motor car, with the greater independence which it gives, that has been the greatest enemy of the railway. So now, concentrating if I may on the Scottish system, we have a very slimline railway system. I remember the time when between Berwick-on-Tweed and Edinburgh, a distance of 60 miles, there were 19 stations. Today there are only six. The Waverley line, which served that vast area of country between Carlisle and Berwick-on-Tweed, is no more. Motorists groan and grumble about the road congestion as cars queue at the roundabouts on the way in and out of Edinburgh.
What lies before us now? What is absolutely essential is adequate investment in the railway system. Without it the structure of future ownership is totally irrelevant. The point has been made as to whether there is any country in the world where railways operate without a government subsidy, and usually a pretty massive one. I seem to remember, in the days of my maiden speech, that there was one country— the Netherlands. But the Dutch were able to do it only because they also owned the canal system, which was extremely profitable. I wonder whether we have not for years in this field tried to be the odd man out. The railways now are crying out for investment while undoubtedly the Treasury is anxious to reduce its involvement still more.
The Government's intentions and desires, I presume, are to introduce a competitive operation backed substantially by private funds to produce reliability, comfort, safety and speed. As far as I can see, one could introduce such competition by running trains owned by different companies between London and Edinburgh. This very morning in the Scottish press there are reports of the Minister of Transport journeying from London to Glasgow, and on to Dumfries and Galloway, and announcing a very substantial investment in the West Coast line. Undoubtedly, to go back to the days when one could 1459 go either east coast or west coast from London to Edinburgh would be competitive. Whether or not it would be economic competition is another matter.
Therefore, if I may concentrate for simplicity on the main East Coast line, I understand from the Bill that the Government intend to invite competitive tenders to run trains on it. I find it difficult to see how more than one firm can run trains up and down the same line other than on a very limited scale. There was a time when a Pullman called the "Queen of Scots" inserted itself into the system and wandered rather slowly via Ripon and Harrogate from Edinburgh to London. There is a train on the Scottish system now called the "Royal Scot" which manages to get a slot. There is, too, the "Orient Express". But it must surely be on the most limited of scales because if the 10 o'clock train to Newcastle were run by one company and the 11 o'clock by another, and the one in front broke down, I just have a feeling there might be a little bit of trouble.
Quite honestly, even one company running trains on a track owned by somebody else is not realistic. Dual responsibility is never a good thing, and surely the room for dispute here would be immense. There is an obvious railway network on its own, as it were, and a precisely-defined railway system; namely, Scotrail. It has come in for a great deal of commendation recently from my right honourable friend the Minister. He has been saying some very kindly things about it; giving it the green light for franchising.
Could one not have the company that wins the franchise for Scotrail owning the track—the signals etc.—ensuring safety all round, running the services, producing the timetables and co-ordinating with the other franchisers? In other words, could there not be what in modern-day jargon is called vertical integration? I freely admit that this is a very dangerous line to take economically because it is bound to be difficult and very expensive to maintain a network to serve Scotland's relatively small and widely dispersed centres of population.
One has to consider the famous bridges. It costs £1 million a year to maintain the Forth Bridge. It costs £700,000 a year to maintain the Tay Bridge. There are 9,500 other bridges in the country, including the one at Inverness which was swept away in the flooding of the Ness. Added to that, there are 27 miles of tunnels. Therefore, without the slightest doubt a large subsidy would be needed. All the same, because here one has a separate entity, I believe that it would be an opportunity for trying out vertical integration.
§ 5.23 p.m.
§ Baroness Stedman
My Lords, I have received considerable post on this Bill and in fact even more than on the question of Maastricht. Running through all that correspondence has been a widely held view that the Government are determined to force the Bill through the House regardless of anyone's opinion. There also seems to be general agreement that the key requirement for our railways is greater investment in the infrastructure and the rolling stock. That has been accentuated this afternoon in earlier speeches. Those 1460 of us who use the East Coast line and the Chiltern line, know that if investment has been made then the service is better and much more reliable.
The Government firmly believe that the private sector will bring new investment money, but as one of my correspondents, a retired railwayman from Leicestershire, said, "What franchisee, even on a 10-year franchise, would be willing to risk the kind of substantial investment needed?" and "Who is going to co-ordinate the overall investment plan and decide on priorities?"
The Government have published no financial statement giving the estimated comparative cost to the taxpayer of running the rail services before and after privatisation. I ask the Minister whether that kind of information is available and whether we shall have it at a later stage in the Bill. Some of us believe that the costs after privatisation may well be greater because the subsidies will still need to be paid to support the socially necessary lines as well as many grants which are at present paid by BR. Added to that are the costs of the various policing bodies needed to regulate the railway operators and the not inconsiderable subsidies which may be necessary to attract and to keep the franchises. If these sums were done and if the Treasury has that kind of money available, why has it not made it available to British Rail to fund the long overdue improvements to the infrastructure and the rolling stock?
We ought to be concerned about the safety of the railways. Under the proposed system too many people will have a finger in the pie: the private operators who may or may not have experience of railway safety, Railtrack, the regulator, the franchise director, the residual BR, the Health and Safety Executive and Uncle Tom Cobbleigh and all. Unless there is tightly co-ordinated control and intercommunication, it can only be a short time before there will be a fatal mishap. What will happen then? The buck will be passed on and on and the rail user will be the loser.
Bureaucracy will increase with a need for controls to be exercised by several bodies to ensure that the rail operators carry out the multitude of rules and conditions that are placed on them. The not inconsiderable cost of all that can only be to raise the overhead costs which will have to be met either by the taxpayer in subsidies or by higher fares from the users. The task of proportioning costs and revenue between the various parties operating the railway would also be an extremely labour-intensive and costly operation.
I would like to press the Minister further on the needs of the disabled. Will there be a similar code such as has already been accepted as part of the Channel Tunnel Bill in relation to maximising access or access to information for those with learning and sensory difficulties? Will there be adequate staff training at all stations and at all levels in how to cope with disability and how to be aware of it?
In May of this year the Minister outlined the Government's commitment to consultation with disabled persons and organisations. He promised an amendment in this House to put a duty on the regulator to consult and give due regard to DPTAC in drawing up and promoting a code of practice to 1461 protect the interests of the disabled passengers. The Minister also gave a commitment to bring forward an amendment in this House to put on the face of the Bill an obligation on the franchising director to require, through franchising arrangements, participation in discount fare schemes for disabled persons, senior citizens and young people. I know that those amendments will be welcomed when the noble Earl produces them. But is it too much to ask him that at the same time he takes into account those people who use the Family Railcard as well as other discounted users?
Users of rail cards will also need to be reassured that the value of the discounts offered will remain at least at the current level and that a discount will continue to be available for a person who travels with a severely disabled person, because most people with disabilities are also those on low incomes. They cannot afford to pay the full fare and many of them, too, would not be able to travel at all unless there is an able-bodied person to accompany them.
I welcome the setting up of the rail users' consultative committees. But the regulatory system to be established must have a clear and comprehensive structure in which the consumers' interests will be best met if the consultative councils are given powers to investigate and comment on all aspects of rail service as they affect the consumer. There is also concern that a duty should be placed on the franchise director to seek the views of the consultative committees on fares and fare structures. I welcome the comments of the Minister in his opening speech on that.
The Bill gives the consultative committees powers to examine discount and special fares, which I take to mean that they could comment on the fares for the disabled passengers, but not for the able-bodied. Does the Minister's promise in another place to preserve senior citizens' and young persons' rail cards mean that the consultative committees will also be able to comment on those fares, but not in relation to passengers in other age groups? We look to the Government to find a way to ensure that through ticketing will still be available and that the travelcard system will survive.
I, too, think it sad that the Government have still to be persuaded to allow British Rail the right to bid to run a service in the same way as any other operator. I cannot do better than quote the Consumers' Association, which states:If BR is left to operate routes unwanted by private companies, we fear a large part of the network will become a service provider of the last resort, with little incentive to improve the standards of service. Consumers will be cheated of the promise of more competitive rail services that privatisation was intended to deliver".I am also deeply concerned about the future of the PTAs and PTEs. Will they be consulted when services in their areas are affected? Will there be a requirement for the Secretary of State, the regulator, and the director of passenger rail franchising to consult the appropriate PTA or executive in the execution of their statutory duties in a given passenger transport area?
I am told that the PTAs actually support financially some 70 per cent. of all regional railway business and one-quarter of British Rail's entire United Kingdom 1462 passenger rail business. Indeed, in Merseyside, one of the largest promoters, there is a gross cost of £50 million per annum. Surely that would suggest that those are the kind of voices that ought to be heard on the issues raised in this Bill.
There is real concern about the breadth of powers reserved to the Secretary of State and/or the regulator, such as the power to give instructions to the franchising director and to exempt some operators from various requirements. What are the terms in which those powers might be exercised? Can the Minister indicate the nature of the instructions that the Secretary of State might be empowered to give to the director of passenger rail franchising in the exercise of the director's duties? What guidance as to the criteria would the Secretary of State intend to apply in exercising his initial exemption powers in relation to the licensing of railway services, franchise, designation and closure notifications? To what extent will the past investment liabilities of the PTAs be reflected in the franchise price or subsidy?
Like the noble Lord, Lord Clinton-Davis, I am also interested in how through ticketing, inter-modal ticketing and railcard discounts are to be practically enforced. What has the Minister in mind to ensure that the cost of any investment in railway facilities made by a PTA during a franchise term produces a fair financial return for the local taxpayer? How will a franchisee's need for certainty in relation to the availability of subsidy throughout the franchise term be reconciled with the annual financial regime within which the PTA, as the subsidy provider, has to work? Those are only some of the questions which will need to be answered in Committee.
I understand that the Department of Transport has given some preliminary assurances to the PTAs and to the passenger transport executives which would define the spirit, in addition to the letter, of the arrangements to obtain between the franchising director and the PTEs. They would also guarantee the ability of the PTE franchising agreement to require acceptance by the operator on single mode and multi-modal travel tickets. They would also guarantee the participation of the operator in concessionary travel schemes for the elderly and disabled. In addition they would recognise that, in the uncertain financial regime from which we are suffering, there would need to be an ability for the passenger transport executive to extricate itself from a franchising arrangement during the course of the franchise term.
I believe that there is also a worry relating to what is likely to be a rather long transitional phase in converting from a nationalised regime to a franchised one. Merseyside is already seeing the effects of appointments made to Railtrack which, directly or indirectly, impact upon the ability of the operator to maintain the quality of delivery in current services.
There is a statutory duty within the Bill for PTEs to co-operate in the conversion to a franchised regime. There is a fear that pressure may mount ultimately on a PTE to compromise its standards and specifications in the pursuit of that duty. For example, Merseytravel has a policy of providing staffing at most stations and at most times—not as a job creation exercise, but in a 1463 genuine attempt, following market research, to reflect customers' concerns about security and revenue protection issues. It is easy to see the opportunities which may present themselves to those with a largely financial agenda to achieve cost economies by cutting staff.
The Secretary of State recently made an announcement that Merseyrail electrified services, which cover two-thirds of the services which are wholly financially supported by Merseyrail, will comprise a separate franchise area, with the remaining services being part of a larger North-West franchise area. This clearly adds to the difficulties of an organisation like Merseyrail to provide both an integrated public transport system and an integrated rail network. It will lead to a constraining influence on the ability to enforce common standards in the interests of fair play to all customers.
The Tyne and Wear Metro has been exempted from the franchising and licensing provisions of this Bill. I appreciate that Tyne and Wear Metro is owned by Tyne and Wear PTE, and that Merseyrail is owned by British Rail, but would it not be sensible to have a similar exemption for Merseyrail electrified services?
Local government outside the metropolitan areas does not have the same close working relationship with British Rail, but in many areas relationships have been formed which will be very much affected by the superimposition of a new national Railtrack bureaucracy. Many of the regional railways outside PTA areas receive grants from local authorities to continue existing services. District and other councils have co-operated in informal joint agreements to ensure that interdependent services can be continued. I fear that those arrangements may be under threat by this legislation, as grant may be disaggregated on a line-by-line basis, and a "base" service level specified by the franchising authority for each line in isolation.
Many district councils have responded to requests from British Rail to help stations and other infrastructure to be provided, refurbished or even rebuilt. In many cases, local authority finance, in spite of severe budget restraints of its own, has replaced British Rail initiative because local managers seem to have had very little leeway recently to agree other than the minimum cost solutions in capital investment decisions.
The relationship between the franchising authority in defining the "base" service and the local authorities and franchisees when negotiating additional subsidised services for locally identified needs requires more clarification in the Bill. No national bureaucracy will be able to understand local social needs on a line-by-line basis unless it produces a large, expensive, decentralised staff structure which would run parallel with the local authority. It must be recognised clearly that local government budgeting processes cannot make commitments to provide guaranteed financial support for the full length of the five or 10-year franchise periods.
The relationship between Railtrack and the local authorities will be a sensitive one, with Railtrack given a remit to recoup all its costs in the financing and 1464 provision of essential environmental and social extras and the basic repair and renewal of structures. Will account be taken of past local authority investment in rail infrastructure in the competitive tender agreements to be made on private stations, rolling stock and infrastructure operators? If not, it will be unfair and lead to difficult future relations if that investment were to be ignored to provide a clean sheet.
Commitments given by British Rail when that investment was made must be written into the sale, leasing and franchise agreements to ensure that it will not have been wasted. With major local government and rail management restructuring taking place at the same time, if local government is to have a substantive role in financing additional services and improved infrastructure, it must be involved closely in the local franchising process.
There is a need for a clear statutory relationship to be set out in legislation, and then constructive working relationships can be entered into and developed. At the end of the day I hope that we shall always bear in mind that the trains must be run for the people and not for the franchisees.
§ 5.41 p.m.
§ Lord Brabazon of Tara
My Lords, I welcome the Bill because I believe that it will do something to slow down the long-term decline in the number of passengers and amount of freight carried on our railway system which has been referred to by so many noble Lords. It will do so, as my noble friend explained in his admirable opening speech, by improving the quality of railway services provided; by ending British Rail's monopoly; by creating the opportunities for private sector involvement; and by bringing competition into the system.
Noble Lords may be aware that I spent some five and a half years of my ministerial career in the Department of Transport, and although I never had direct responsibility for the railways during that time, I was always a fairly close observer of what was going on. During that time, the Government reversed the decline in investment in the railway system. Indeed, investment was at record levels not seen since we changed from steam to diesel some 30 years ago. So this Government cannot be said to have neglected the railway system. The Bill represents the next stage of improvement.
One of the things that I admit irritated me, and still does, is the rather futile argument that we hear so often, and heard again today, about public versus private transport. The argument for public transport, in particular the railway, has had a new impetus put on it in recent years by new found environmental considerations. That has given new ammunition to the anti-car lobby. The fact that that lobby, whether it be the party opposite or organisations such as Transport 2000, is funded substantially by railway interests —BR itself, the railway unions or both—should not of course cloud one's judgment about the case made.
I said that the arguments were futile, and I believe that they are. If one is to have a healthy economy in this country and a reasonable standard of living for its citizens, then one needs to support improvement in all 1465 forms of transport. To say that the need for a by-pass to be built or a motorway widened can be avoided by improving the railway system is just not true. If noble Lords look at their own travel patterns, I would wager that the number of times they can switch mode is few indeed. The same is true to a lesser extent of freight.
The reason that the proportion of passenger journeys taken by rail or bus has declined is not due to lack of investment in either system; it is because over the past 40 years or so people's standard of living has improved and they want the freedom of opportunity and movement which comes from owning one's own car. Nor has the number of cars increased because of new road building. It is because people have become better off. Figures over recent years prove that.
Noble Lords have described this Bill as privatisation of the railways. I rather wish it were, but I understand the reasons the Government have not been able to go the whole way. I am, however, worried that over half the cost of running the railway, the Railtrack element, is to be left in the public sector with uncertain incentive to improve its efficiency and attract more traffic onto its track. I hope that my noble friend will confirm that it is the Government's intention to privatise Railtrack as soon as possible. In the meantime I hope that the Railtrack management will contract out to the private sector as much work as possible. I understand that franchisees will be eligible to bid for Railtrack work, and so there we could have the element of vertical integration that some, including my noble friend Lord Stodart, say is missing, and that is welcome.
Unlike noble Lords opposite, I am a firm advocate of privatisation. The Government have a proud record and the transport sector has been at the forefront. British Airways, BAA, British Transport Docks, National Freight Corporation, Sealink, British Transport Hotels, National Bus: all have been a great success, and I challenge anyone to say that they would rather see them back in the public sector. Indeed, I believe that even the Labour Party (and the noble Lord, Lord Carmichael, can perhaps confirm that to me in his wind-up speech) would not now re-nationalise any of them. Investment has been at record levels, certainly many times higher than could have been accommodated in the PSBR. So I am certainly not afraid to see BR on the way to privatisation, even if it is not going as far and as fast as I should like.
I turn now to what I think is one of the most important elements of the proposals, and that is the wish to see the railways carry more freight. I do not know anyone—certainly no one who has spoken this afternoon—who cannot give that objective hearty support. Freight is one area of railway privatisation policy where substantial support for the Government's policies has come from the private sector, particularly the major transport companies which would like a realistic alternative to road. But of course the inflexibilities of the rail system, particularly over shorter domestic journeys, makes it difficult to be price competitive with road.
1466 The Government have responded positively to the pressure for help with pricing. Freight already gains access to the system at marginal cost, although the commercial relationship between BR and individual customers makes it difficult to get to the bottom of any consistent charging regime for freight access to the essentially passenger network.
The Government have made welcome announcements regarding,an expanded system of capital grants for new freight facilities, a new revenue grant to help meet track costs (both grants tied to precise environmental benefits), and a proposal to allow 44 tonne lorries for the road leg of intermodal freight movements, when the trunk haul is by rail".My understanding of the procedure for determining a rail access grant is that a new freight customer in the first instance seeks to negotiate train paths and access rights to the network with Railtrack. If the charge Railtrack wishes to extract is regarded as too high, the new customer goes to the Department of Transport with an environmental assessment audit to demonstrate the benefits of transferring or placing a freight service on rail rather than road. At the same time, the potential customer demonstrates the extent to which he needs track access grant to make up the difference between Railtrack's charge (which should be confined to its avoidable costs) and what he can afford to make the service viable. So far, so good. But what is to stop Railtrack from "puffing up" its charges in the knowledge that the customer can obtain grant; or more likely, how will Railtrack get to the bottom of its real "avoidable cost", and will it be required to justify to the Department of Transport that it has offered the lowest price to the new freight customer, before the Department of Transport will give any public grant? Those are important issues which need to be resolved quite urgently if private freight customers and new rail freight operators are to have the confidence to develop their businesses and take advantage of the open access provisions in 1994.
I should like to turn to another aspect of the Bill which requires some thought. The Government were persuaded in the other place to provide the regulator with the additional responsibility for the carriage of goods (Clause 4(b)). That is an important addition and is to be welcomed, but it leaves some loose ends to be tidied up. Once such loose end concerns closures.
As I have explained, Railtrack will be responsible for providing the infrastructure on which freight operators will run their services. Much of this infrastructure will be shared with passenger services; some will be shared with other freight users. Occasionally, the infrastructure will be dedicated to one freight service.
We are told that Railtrack will charge freight customers according to what the market will bear, but in many cases this will be no more than the "avoidable cost" of the infrastructure. In some cases grants will be available from the Government to cover infrastructure charges. But avoidable cost will vary according to the number of users sharing the track. Withdrawal of passenger services may therefore have knock-on effects on freight traffic; for example, the increased cost burden shifted on to remaining freight users after the withdrawal of passengers may make the freight 1467 services non-viable. Alternatively, in cases where there is environmental benefit, the freight services may require a grant to remain viable. But it is very important that the regulator is aware of any such possible knock-on effects before sanctioning any closure of passenger services.
Railtrack will, however, have an incentive to cut capacity requirements. The prospect of increased freight flows paying only marginal costs may not be a strong enough incentive to keep unused or under-used capacity available for future growth. If the Government's policy is to succeed this capacity must be held in reserve.
At the very least the regulator should be aware of the costs of closing facilities which are used or may in the foreseeable future be used for freight. Furthermore, no closure of a freight facility or potential future facility should be allowed without first giving the private sector the opportunity to acquire the facility for operational purposes. At the moment there are no procedures in place for the regulator to be able to assess the implications for freight of any proposed passenger service closure.
Nor is there any requirement for Railtrack, or any other facility owner, to inform the regulator of a closure which will affect freight or may potentially affect future freight carryings. In view of the regulator's duty to promote the use of the railway for the carriage of passengers and goods this seems an important omission and I would be grateful if my noble friend could indicate whether he intends to deal with this matter himself.
I believe that amendments will be needed to Clauses 32 and 34 and I would be prepared to tackle this matter in Committee if my noble friend feels unable to respond positively.
Many noble Lords have rightly spoken of the need for new infrastructure investment in the railways system. I wish to refer briefly to an exciting investment which is about to begin; it is the building of the Heathrow to Paddington express. I declare an interest in that I am associated with BAA, which is putting up £300 million to build the new railway. It will own the track between Heathrow and the mainline and it will also pay for the electrification of the whole line.
The Bill contains a number of problems for that line and they will apply equally to other potential private investors in rail infrastructure. The Bill makes provision for the grant of compulsory access rights over rail infrastructure which is publicly or privately owned. Clearly, private investors will wish to be sure that any return on their investment will not be diluted by the grant of compulsory access to competing services or that their own use of their asset will not be materially interfered with and that use by a third party will be on not less than a commercial negotiated rate for that use.
Secondly, the franchise director has the power indirectly to grant compulsory access rights. Any private investor will again not wish to see his asset used by third parties on anything other than commercially negotiated terms.
1468 Thirdly, the Bill makes provision for a licensing regime. The regulator and Secretary of State are given powers to grant exemptions from licensing requirements. The statutory duties of the regulator and the Secretary of State (including those normally associated with economic regulation) apply both in the granting of licences and in the granting of exemptions. There is no provision in the Bill allowing the Secretary of State to exempt from economic regulation a service run partially on public (licensed) infrastructure and partly on private (and thus hopefully exempted) infrastructure.
Any potential private investor will wish to be certain as to freedom from competition through the compulsory grant of access rights over private assets; certainty of access to the general rail network on reasonable commercial terms; and freedom from franchising and economic regulation where part of or the whole of the rail infrastructure used in the provision of a service is funded privately. Again, amendments may be necessary to cover those points if we are to see what we all want; that is, more investment in the railways system.
Before I conclude, we heard from the noble Lord, Lord Clinton-Davis, a characteristically robust attack on the Government's proposals. I believe, as I would, that most of what he said was wrong and I believe that many of his points have been dealt with. But what we did not hear was any credible alternative strategy proposed by the Labour Party for the future of the railways.
I remind your Lordships that Labour has opposed every privatisation since 1979. Scaremongering is not a new tactic in its opposition to our privatisation programme. And in the case of the railways, it will be proved wrong just as it has been proved wrong before. For example, Labour said that a privatised British Telecom would not bother with call boxes, whose upkeep Labour considered too expensive for a private company to remain interested in. But 96 per cent. of call boxes now work at any one time—an increase from only 75 per cent. in 1987—and there are now more than 100,000 call boxes compared with 77,000 in pre-privatisation days. Is there a parallel here with the provision of rural rail services? Labour also said that prices would rise but they have fallen substantially in nearly every case while investment has risen by not inconsiderable amounts. I hope that the Bill will allow the same to happen in the railways system and therefore I give it my support.
§ 5.57 p.m.
§ Lord Ewing of Kirkford
My Lords, the noble Lord, Lord Brabazon, nailed his colours firmly to the mast on the principle of privatisation. He was right to say that the Labour Party has opposed every privatisation measure which has come before the other place and your Lordships' House. However, the noble Lord was wrong to say that every privatisation proposal that has been implemented continues to meet with any degree of public approval. It was noticeable that the noble Lord omitted from his speech any mention of the privatisation of the water industry. If any noble Lord would care to ask the consumers, who are the 1469 victims of the massive increases in charges in the privatised water industry, they will soon say whether they want that industry to be put back into public ownership.
The noble Lord, Lord Brabazon, chose a bad example in quoting the bus industry. All the recent opinion research shows that the customers using buses are most dissatisfied with the way in which that industry has developed since privatisation. There is hardly a city in this country in which there are not massive problems in relation to the deregulation of the bus industry which was followed by its privatisation. I believe that the noble Lord has a case to argue. Although I respect him for the case that he put forward, I do not agree with it. He will have to come to terms with the fact that public opinion, with the experience of the privatisations which have already taken place, is changing. That is why there is little or no public support for the Bill which is today before your Lordships' House.
In anticipation of a further privatisation proposal being submitted in relation to the Post Office, I say that if your Lordships consider that the opposition to this Bill is massive, wait until the Government dabble in the field of privatising the postal services and then see the extent of the opposition to privatisation. The Minister and the noble Lord, Lord Brabazon, mentioned the privatisation of British Airways. The Minister said that in 1981–82 it cost the United Kingdom taxpayers more than £80 million. I thought that the Minister would have added that that was because that was the year in which the publicly owned British Airways was slimmed down to the extent that some 7,000 or 8,000 jobs were shed and the Government met the redundancy costs. British Airways debts were written off before it was put into the private sector. There was no question of the debts being passed over in the process of privatisation. Therefore, when the noble Earl speaks about the position of British Airways in 1981–82, it would be advisable to complete the story. The complete story is that that was the year in which the Government chose to write off those massive debts and also to meet the costs of the redundancy package for a slimmed down British Airways before it was put into the private sector.
I do not know whether that will be the Government's proposal in relation to British Rail. However, I say with great respect to the noble Earl that the Bill that we are debating today is the best job creation measure that the Government have ever introduced. A number of bodies will be established and there will have to be one more because you cannot have the establishment of such a plethora of bodies without having a central body holding them all together. A co-ordinating body will need to be established to hold together the track authority and all the other bodies that are being established. As I say, this is an excellent job creation measure. The tragedy is that it will be jobs for the boys. I have absolutely no doubt that even at present there are some former Government Ministers, perhaps of a recent vintage, who have their eye on some of the appointments which will be made as soon as this Bill becomes law.
1470 The Minister spoke about franchising leading to privatisation and the break up of British Rail—and I shall return to the speech of the noble Lord, Lord Brabazon, when I end my remarks on the Labour Party's position on this matter. When the Minister speaks about those matters he does not seem to understand, or if he does he does not wish to face up to the responsibility of understanding, the damage that he is doing to an integrated transport system. It does not need to be privatised or franchised. It needs to be modernised. It is simply not the case that the private sector will produce the capital in order to modernise the rail network to the extent that is required.
Mention has been made of the French SNCF. Its record is absolutely outstanding compared with our record in this country. That is a publicly owned rail network. When the French SNCF decided to modernise its system by building a series of pickaback stations in order to bring the travelling passengers into those 15 centres from where the TGV is to operate, and when it invested millions of French francs in straightening out—it may seem simple, it may even seem trivial—bends on the track in order to allow the TGV to travel at speeds of 250 miles per hour, 48 per cent. of that investment was funded through the EC.
I can remember in my time in another place asking the noble Baroness, Lady Thatcher, why we did not ask for funds from the EC to modernise our railway network system. The noble Baroness was proud of the fact, as she always was, that we had not sought any EC assistance in order to modernise our rail network. The irony is that because the Bill specifically excludes British Rail from bidding for the franchise, the very company which is nationalised and doing well—the French SNCF—can bid for the franchise in this country. That will make possible the ludicrous position—and I do not know how the Government are getting in this mess—that the German railway, the Deutsche Bundesbahn, or SNCF will bid for a franchise in this country while British Rail cannot bid for that franchise. It seems to me that that is a mad situation to present to the people of this country, but the Government are determined to go ahead with it.
I want to deal with the question of the socially necessary lines. I forecast now—and no doubt the Minister will deny it in his winding up speech—that the cost of subsidising those socially necessary lines will eventually, and sooner rather than later after the franchising takes place, be passed to the local authorities. Who will decide what is a socially necessary line? What is the definition of a socially necessary line? I can imagine the arguments that will take place about whether the Sterling to Falkirk line is socially necessary or whether the Edinburgh to Kirkcaldy line is not socially necessary. That will produce a whole series of disputes and arguments about what is and what is not socially necessary.
I look back at the privatisation of British Telecom and the whole question of what was then described as uneconomic call boxes. Your Lordships will remember that the Government produced their privatisation proposals for British Telecom before the 1983 general election. Because of the onset of the election, that Bill 1471 was dropped. After the 1983 general election the Government introduced a second Telecommunications Bill.
In the original Bill it was proposed that the Government would meet the costs of the uneconomic call boxes, but in the second Bill that obligation to meet the cost of those uneconomic call boxes in relation to British Telecom was passed to the local authorities. That is the point that I am making. That is what will happen. The Government will not accept financial responsibility for subsidising the cost of those socially necessary lines. Sooner rather than later that responsibility will be passed to the local authorities.
The noble Lord, Lord Stodart, mentioned the question of Scotrail and he mentioned the Forth Rail Bridge. There has been a substantial cutback in the maintenance of that bridge. Scotrail has announced that it is to cease painting it. That is very dangerous indeed. It is not painted for decorative purposes. It is painted for maintenance purposes to prevent corrosion and rust. That leads me to the conclusion that the hidden agenda for Scotrail is to close down the route from Edinburgh, Kirkcaldy, Arbroath and onto Aberdeen and in that way avoid the need to use the Forth Rail Bridge. Trains will be rerouted via Perth, Dundee and up to Aberdeen in the north in that direction. However generous one may be, it is difficult not to be suspicious about the reason for ceasing to paint the Forth Rail Bridge. That is a very interesting topic.
While dealing with Scotrail, I should say that there is a well publicised view that the management of Scotrail will be the successful bidder for the franchise. I am not sure about that because I believe it will have competition from Stagecoach, the bus operators which operate throughout the United Kingdom and abroad. One of my worries—and I hope that the Minister will take it on board—is the Government's position as regards encouraging senior civil servants to accept non-executive directorships of companies on the basis that they want those senior civil servants to get closer to industry.
The position we have with Stagecoach is that a senior civil servant from the Scottish Office, an Under-Secretary, Muir Russell, has been allowed to accept a non-executive directorship with the company. We have already had experience of Stagecoach running franchised coaches on the Aberdeen to London trains. It was not a success. There were no washing facilities and old rolling stock was used. The rolling stock was not brought up to date, but was brought up to date as far as could possibly be the case using old rolling stock. I saw the Transport Minister, Mr. Roger Freeman, walking off the train after an overnight journey from Aberdeen on which there were no washing facilities. He walked off the train at Euston Station under the blare of all the television cameras looking as if he had just walked out of a Burton's window. I suspect that he used British Rail's washing facilities while travelling with Stagecoach. I believe we must look at the whole question of who bids for the franchise.
1472 There is also the question of management buy-outs. Management franchising is also a myth. All the experience is that, by and large, the management and employees have about 2 per cent. of the shareholding; the banks and the financial institutions hold the other 98 per cent. They are pulling the ropes, holding the purse strings and dictating the policy. The management buy-outs must be examined for what they are. They are certainly not management buy-outs.
I have seldom seen a Minister—and I say this as kindly as I can to the noble Earl—introduce a Bill with so little enthusiasm. In my remarks I was tempted to suggest something to him that he could have easily have got away with today because there is so much going on inside the Conservative Party and the Government: he could easily have got away with getting up at the Dispatch Box and withdrawing the Bill. I doubt whether anyone would have noticed.
However, the Minister's failure to do the latter brings me to my final point. Your Lordships will have heard the story of the chap who went to the ticket office at the railway station and asked for a return ticket. The ticket clerk said, "Where to, Sir?" The chap looked at him in absolute amazement and said, "Back here, of course". I regard this Second Reading debate as the first leg of a return journey. Of course, the return journey is back here; that is, after the election of a Labour government—and I finish on the noble Lord's point—who will introduce the proposals put forward by my honourable friend John Prescott to take the industry back into public ownership.
We shall recreate an integrated rail network in the country for the benefit of the people who use it and not for the benefit of those who franchise it. I hope that the Minister appreciates that what he is doing under the legislation is merely a temporary measure until after the date of the next general election.
§ 6.13 p.m.
§ Lord Wade of Chorlton
My Lords, I welcome the Bill and congratulate my noble friend on the Front Bench for the way in which he introduced it. I support everything he said. Moreover, I gained the impression that he introduced it with great enthusiasm. However, even if he did not have that enthusiasm, both my noble friend Lord Brabazon and I certainly have the enthusiasm to ensure that the Bill goes through. I must also apologise to my noble friend for the fact that, due to a previous commitment, I shall be unable to remain for the end of the debate.
I was brought up in a business that supplied horses to the railway companies, my grandfather being the main supplier to the LMS and the GWR. When I was a young boy, I can remember when the chap used to arrive from the LMS to buy the horses. He was a man called Quigham. He was an Irish veterinary surgeon who would arrive in Chester at about 10 o'clock in the morning and drink a case of Worthington's Pale Ale. He would then go and buy 100 to 150 horses and, afterwards, would drink another case of Worthington's Pale Ale. Finally, he would get on the train and return to London. Apart from the fact that, clearly, very few people are able to drink two cases of Worthington's Pale Ale after breakfast and before 1473 lunch, the main point of the story is that he was actually able to travel to Chester after having had his breakfast and have the time to drink two cases of Worthington's Pale Ale, buy 100 to 150 horses and then catch the train back to London before he had his lunch. It is not possible to do so today, whether or not one is able to drink 24 bottles of Worthington's Pale Ale.
We hear from everyone about the deterioration of our rail services; indeed, I have heard people complain in this House and everywhere that it is an unsatisfactory situation which cannot continue in the interests of the nation. Noble Lords opposite talk about the need for an integrated system, whatever that may mean. I take it to mean a highly controlled and centrally planned system by which everyone knows where every vehicle is at any one time. That seems to me to be completely impossible. However, they do not talk about what we really want which is the most efficient system that it is possible to operate.
The current position is that vast expenditure, taxpayers' money, goes into British Rail and railway services as against our road services. The latter carry some 90 per cent. of road traffic and the rail services take some of the other 10 per cent., although not all of it. Expenditure wise, it takes half as much money as we put into the roads. That is clearly an unacceptable system. It is absorbing far more money than is justified by the freight it carries. As has already been pointed out, the amount of traffic carried is reducing both in terms of freight and people.
Clearly, there has to be—and here I admire the Government —a fresh look at how our rail system is operating, how it is run, how it is financed and how we can make it much more efficient in the use of its resources for the benefit of its customers. At the end of the day, they are the ones who decide whether or not it works.
I welcome the suggestion that there should be a Railtrack and a franchising system. I know that there has been much talk about other systems, but I believe that that is the way ahead. It is exactly the same principle as we use when we travel on road transport. The roads are paid for and owned by the state and we use them. History has proved that government-run organisations are always the least efficient. That has been shown by all privatisations. I accept what the noble Lord, Lord Marsh, said about rail having certain assets that are not normally taken over, but that does not alter the fact that the actual management and running of the organisations have been considerably more efficient within the private sector than they ever were within the public sector.
The total tonnage of rail freight is equivalent to the annual increase in the road freight. When one considers the implications of that and looks to the future over the next five or 10 years, one realises that an enormous increase will take place on the roads with hardly any increase—in fact, there will be a reduction if we carry on as we are—in rail. Clearly there has to be a fresh look at how we can change that balance.
The resources that the Government are using at present are ineffective. We must have a different approach regarding how we can make the railways 1474 more efficient. It has not happened, as noble Lords have suggested, in all other countries in Europe. The only way that they have achieved it is by pushing enormous sums of money into it. Indeed, the noble Lord, Lord Marsh, made that point. The amount of taxpayers' money that has to go into running the Italian, the French and the German railways is something that we could not possibly carry in this country. They are very concerned about the way ahead. The Germans especially are looking very closely at how they must change their system; they cannot carry on as they are. They have so many complaints from their industrialists and their taxpayers that they are not prepared to continue to carry the enormous burden of running a service which, as is happening here, is carrying less and less.
One of the aspects of the Bill that I very much welcome relates to the opportunities which I see it presenting to the North-West which, as many noble Lords will know, I wish to see expand. It must use the opportunities, especially as regards the Channel Tunnel and the growing market in the EC. We are a long way from many of those markets. People use expressions such as the golden triangle or the blue banana when they discuss the rich areas of Europe. The North West is not adequately linked to those areas. Therefore we need to develop a system that permits the producers of the North West—that is the major exporting region in the British Isles to transport their products to the main markets of Europe as cheaply as possible. I believe that we can now bypass what has been an inefficient method of moving freight from the North West into Europe; that is, the railways. The railways now transport fewer and fewer of our goods and therefore we are more and more dependent on road freight. The upkeep of the motorways imposes a heavy cost on the nation. I hope that we can now create a consortium to develop a dedicated line to transport our goods. We should use the Channel Tunnel to further transport our goods to the main centres of Europe. We would encourage much greater investment in the North West if we can offer an efficient freight handling system. We need to develop main freight centres in Manchester and Liverpool.
Contrary to what the noble Lord, Lord Marsh, has said as regards no one being interested in the railways, I read in the paper today that GEC has invested in Eurorail. I do not believe the noble Lord, Lord Weinstock, would have made that investment without giving it considerable thought. He has decided that that investment is a sensible use of his resources. As a result of that investment Eurorail has stated that it will invest in the West Coast main line. Many of us have been asking for that investment for some time as it is necessary if we are to develop the North West.
It has been said that this privatisation is different from all other privatisations. I accept some of the points made by the noble Lord, Lord Marsh, but I do not see that some of the major issues involved in this matter will undergo great changes. For example, I still believe that there will be adequate safety provision and provision for carrying passengers with special needs. I believe that there will still be integrated 1475 routing systems and discounting procedures. I believe that those procedures will operate just as effectively in a rail network that is owned by different franchisees as they do, for example, in the airline or the road transport industries. There are fully integrated booking systems for those two industries and their safety records are good. Special provision is made for those passengers who require it and there is no need to insert special clauses in legislation to bring about that situation. It is the market place that has created the demand for those provisions and that demand has been satisfied by the industries concerned.
I welcome the Bill. I think that it is a positive step forward and that it will open great opportunities as regards encouraging people to invest joint venture capital. That is the key to this matter.
I am always delighted to listen to the noble Lord, Lord Ewing, because his presentation is so splendid, but it was a pity that the content of his speech was not equal to that presentation. I would say to the noble Lord that history has proved that privately-owned organisations motivated by people who know exactly what the consumer wants, are always the most efficient users of our resources. That has been proven in nearly every sector of our economy. The rest of the world has realised that if it is to have a competitive advantage, it must follow that route too. The Government will not find it easy to bring this measure about and that process will take time. The legislation will need to be flexible as we shall not be able to solve all the problems in the short term. In my view this Bill will be of benefit to the nation.
§ 6.24 p.m.
§ Lord Shaughnessy
My Lords, I take part in this debate primarily because I have lived in a railway atmosphere for a good part of my life. My grandfather, who entered your Lordships' House in 1916, headed the first transcontinental railway in North America, the Canadian Pacific, for 24 years. He handed down an interest in, and love of, railways which has persisted.
As many speakers have asserted, this is a complex Bill. It has been altered in several significant respects in its passage through Parliament thus far, but it still contains a whole range of provisions which, if not modified, will, I fear, have a negative effect upon rail transportation in Britain long after the new regime is in place.
Historically, it has been the trains that pushed back the frontiers of the continents in North America, Russia and Australia, to mention a few. It is the railways that have been the single most important factor in commercial and industrial development in countries of smaller area but with a high concentration of population, such as Britain, before the development of road transportation.
I agree with my noble friend Lord Marsh that any proposal to split up an integrated rail system that works, even if it has some imperfections and is a considerable cost to the taxpayer, must be approached 1476 with the utmost caution. I have grave doubts that the measures contemplated by this Bill will produce felicitous results.
It is important to consider that all national rail systems have two distinct operational centres—the passenger service and the freight system. The public's conception of railways is largely concentrated on the passenger operation because that is what they travel on. However, the freight system is of equal and perhaps greater importance as in most national railways it is the freight haulage that generates the greatest revenue whereas passenger services in almost every case operate at a substantial loss.
According to British Rail figures for 1991–92, although the combined freight operations of Trainload Freight and Railfreight Distribution show a loss of about £60 million, the three passenger networks—InterCity, Network SouthEast and Regional Railways—had a combined loss of over £760 million. I mention those figures because in all likelihood after denationalisation it will be the freight operations that generate the bulk of the profits, if there are any.
Although the Bill provides for government subsidies to the privately franchised parts of the system, which may be initially uneconomic, the late Lord Ridley—a former Secretary of State for Transport—said in a radio interview some time ago that in the event that the franchisee found that the level of subsidy did not cover his losses, there was a danger that the Treasury, in the interest of controlling the public sector borrowing requirement, might insist that the subsidies were already too high. What happens then?
As long as the proposed privately enfranchised lines have to meet, even if indirectly, the cost of maintenance and renewal of the tracks they run over and of the signal system, they will always be at a disadvantage against their road transportation competitors who operate over highways built and maintained by taxpayers' money. Under those conditions how can the private rail operator compete? Furthermore, any failure or disruption in track viability or signal function could have a major effect upon the cost and efficiency of the franchisee's operation over which he would have no control.
In its second report, the Transport Committee in another place pointed out:With the notable exception of the United States and to a partial extent in Canada, national rail networks throughout the world are owned by the state".Even in the United States and Canada passenger services are operated by federally controlled bodies, namely Amtrak and Viarail. I suggest that there is a loud message there.
There are a number of anomalies in the Bill, which I shall not dwell upon tonight but which require your Lordships' attention. The last major restructuring of the British railway system, the Beeching Report of 1963 on The Reshaping of British Rail, had a number of undesirable consequences which I believe resulted in the decline of public confidence in British Rail. Therefore, I hope that your Lordships will be 1477 extremely cautious about embarking upon a similar voyage again and will examine the Bill with great care in its stages through the House.
In social, political and economic terms, an integrated rail system is the spinal cord of a civilised nation. If that cord is severed and fragmented, as I fear will be the effect of this Bill, the results could be disastrous.
§ 6.31 p.m.
§ Lord Mountevans
My Lords, I declare an interest, as ever when we deal with railways.
Today's Bill gives us an opportunity to discuss the future role of the railways in the framework of the nation's infrastructure. Do we want a commercial railway or a social railway? That is a difficult and important choice from the passenger's point of view and a more difficult one from the point of view of the taxpayer. In parallel, do we want the freight railway to be commercial or to be a relatively low-cost benefit to industry, as is the motorway and trunk road network? Those choices are not irreconcilable, but we must be careful to give each the right weighting.
While I welcome any steps which increase rail's finances and the efficiency of rail and therefore support the strategy of the Bill in general terms, I have a number of reservations about the methods and the detail proposed by the Government.
British Rail has been in public ownership for some 45 years. During that time 23 transport Ministers have come and gone, there have been eight transport or railway Acts and 80 parliamentary reports on or touching on the railways. Those have left us with a national network which is strong on what have been referred to by several speakers as the network benefits. They have left us with a network whose efficiency is widely recognised at home and abroad. It is a network which, as the noble Lord, Lord Marsh, pointed out, costs the taxpayer relatively little in international terms. It has half the subsidy of the French railways and a third of that enjoyed by the German railways. The noble Lord also touched on Italy. If BR enjoyed the level of subsidy enjoyed by the Italian railways —which God forbid—we would not, as Sir Bob Reid once noted, have to pay fares at all.
While BR lacks new, specially constructed railways such as the TGV in France and the ICE in Germany or AVE in Spain, it still manages to run more trains at over 100 miles an hour than any other European railway, while the half-hourly frequencies enjoyed by places such as Newcastle, Bournemouth, Birmingham and Leicester are undreamt of abroad.
British Rail is often criticised for its performance, as tends to be the case occasionally on great railways, on the basis of personal experience. However, it is worth pointing out that uniquely among British public transport operators British Rail publishes its performance statistics every month at the point of sale. I travel widely, almost entirely by train because, as many noble Lords will know, I have never held a driver's licence, and I find serious delays uncommon. My arrival times are predictable, which is much more than one can often say of the motorway network, particularly in recent weeks.
1478 Like other noble Lords I should like to see more freight carried on the railways. The present position has as much to do with the changing structure of industry and the concentration of distribution depots along the motorway network as with good railway management. It sometimes seems to me that we have a generation of company transport managers whose status and prestige are based on fleets of lorries using a motorway network which has expanded and continues to expand to meet their needs.
One would wish to see more bulk haul traffic on rail and more co-operation with the private sector, such as in one example at Wilton, on Teesside, where a number of years ago ICI gave the land and BR put in the container terminal infrastructure, to mutual benefit. However, one has to be concerned that other unsuccessful private sector involvements, such as CharterRail and Tiger Rail, do not fill one with confidence for the future, even if the charging regime is made more favourable—and here I welcome the Government's proposals but wonder how they are to be financed. I also welcome bulk haulage concepts such as those of Mendip Rail and PowerGen, but am much more pessimistic about rail's ability to attract and keep wagon-load or container-load traffic.
Over the past 10 years British Rail has invested at record levels. In the pipeline we have mega-projects such as Union Rail, its associated London terminal, CrossRail and ThamesLink 2000. In addition, the railways—in whatever form they take post privatisation—have an ongoing investment requirement of £800 million per annum for renewal and replacement for at least the next decade. Total investment on such a scale can only be financed by harnessing additional private capital.
If the establishment of rolling stock companies or the contracting out of track and signalling maintenance brings access to private capital that should be welcomed, and one can look for continued progress. However, one must be concerned that as long as Railtrack remains in the public sector it will be constrained by Treasury targets and PSBR requirements. One could reach the Swedish situation in which operators, the franchisees, improve quality and efficiency and cut costs but find that further progress is limited by the track authority's inability or reluctance to invest.
Rolling stock leasing also has potential for generating private capital. I see no reason why the concept should not work for rolling stock. It works well for foreign railways and for airlines and ferry companies. Closer to home, it works for road haulage and company car fleets. In all those instances the concept and the legal framework are long established and well understood. In rail terms the framework is still evolving, almost as the Bill goes through your Lordships' House. It is essential that that evolution takes place quickly, for two main reasons. On the one hand, the average age of the rolling stock fleet and the lifespan of a railway coach is such that the railways will need to replace at least 200 vehicles per annum for a considerable time. On the other hand, the rolling stock industry is in a slump which could be terminal. We cannot be certain that foreign suppliers will be 1479 able to fill that gap because their order books are already full and because of the technical difficulty of loading gauge.
I turn now to the future operation of our railways following the enactment of the Bill. Like other noble Lords one must be anxious about the daunting array of regulatory bodies involved: the Health and Safety Executive looking after safety; the regulator as licensing authority; the franchise director determining service levels and fares and frequently involving passenger transport executives as it is my understanding that they will be co-signatories to relevant franchises when they are awarded; and Railtrack controlling access to the track. There is a real danger that the bureaucracy—and who is to pay for it?—will seriously damage rail's ability to compete with the car, the lorry, the coach or the plane.
In particular, as has been mentioned, the influence of Railtrack will impinge on the quality of the product everywhere except the Isle of Wight where there will be a vertical franchise. If the present BR rule of thumb holds good, Railtrack will fix some 45 per cent. to 50 per cent. of an operator's costs. Furthermore, it could have a very much more important day-to-day operational influence in that up to 60 per cent. of delays on British Rail nowadays arise out of track or signalling problems. If I were going for franchise, I should be very concerned about a deal where perhaps 50 per cent. of my costs were outside my control and 60 per cent. of my quality—because in effect that is what it is was vulnerable. It is hardly an encouragement to a franchisee. I would very much hope that one could look for more integrated franchises as our experience of franchising develops. I would hope for franchises which were long enough to encourage investment. I hope that Her Majesty's Government have taken a look at what is happening, for example, in Argentina where franchise agreements specify not only the operation of a service but a long-term, carefully costed investment plan.
Franchising also raises other issues. Some franchises will undoubtedly prove attractive, as has been mentioned, such as those where recent investment has been put in place. I refer to the East Coast main line and Chiltern Turbo. Others will be less so. It is worrying that if they remain in the public sector one will have a chequer-board effect in terms of quality and convenience of service.
It is wrong that the Government have asked BR to consider breaking up long-haul regional railway and InterCity cross-country services—which make economic operational and marketing sense—so that those services fit more easily into franchised patterns. Similarly, it would be a shame to break up InterCity as a marketing entity. By any standards, it is a brilliant BR invention—parenthetically I mention that in a similar context, the French innocently proffered the word "flasher"—guaranteeing a specific level of frequency and quality, and now used by numerous railways ranging from those in Norway and Denmark to Australia. Such a success is all too rare and we must work to preserve it.
1480 Earlier in my speech I referred to network benefits. There are a number which we must take care to preserve even if the passenger railway is split into franchises with elements remaining in the public sector.
We need a nationwide information system. In our debate on 9th June on transport in London, the Minister conceded at col. 962 of the Official Report that,We will … need to ensure that comprehensive information is available to passengers".I am sure he will accept that that applies not only in London but also in the country as a whole. We need a reliable national timetable based on franchisees only being allowed to commence services or change them at set times of the year. We need a comprehensive reservation system. We need a reliable means of allocating revenue between operators. The means could be taken off the shelf from British Rail which already has the methodology to attribute a Brighton to Hull fare, for example, between the relevant subdivisions of Network SouthEast, London Transport, InterCity and regional railways. I believe that if that system can be preserved and exploited, whether it remains in the public sector or, as I understand has happened in one or two of the PTAs, is taken over by a private company, many of the worries that people will have, not so much about the rail card element but about other discounted fares, could be alleviated.
I should like to consider briefly tourism. British residents made 9.5 million rail trips in 1991 for the purposes of tourism. A further 33 million day trips cannot be overlooked. Some 9 million visitors also use rail at some point in their visit. Of those, 25 per cent. buy their tickets outside Britain, including over 100,000 visitors who buy BritRail passes. Perhaps I may give another statistic. Sixteen per cent. of InterCity's £900 million turnover comes from British or foreign tourism trips. All those customers are very welcome for marginal revenue, generally travelling off peak. They are all buying the network benefits to which I have referred. However, it is essential to both the railway and the economy as a whole that tickets, BritRail passes, Rover tickets and other facilities are readily available overseas. The tourism industry believes that Government, rather than slipping into a "let's leave it to the industry" attitude—that was demonstrated in their response to the Commons Select Committee should reconsider their position and take steps to protect that rail revenue.
My final concern is that what I call the British Rail residuary body will be left as the operator of last resort. I believe that it is wrong that with so many changes—Railtrack, franchisees, regulators, leasing and private finance to name but a few—BR staff, who are the custodians of our present rail expertise and to whom considerable tribute has been paid during the Bill's passage through the two Houses, should not be allowed to bid for franchises, as has been so successfully done by Swedish Rail in Sweden. That is a topic to which we shall surely return.
The Government's proposals for commercialising the railway are unprecedented anywhere in the world. 1481 I leave the Government, and the House, with the salutary thought that we have only one chance to get things right.
§ 6.44 p.m.
§ Lord Taylor of Gryfe
My Lords, a great deal of expert opinion has been offered on the subject of today's debate, as is common in this House. Former chairmen of British Rail have participated. Former Ministers have participated and offered advice to the Government. I have rarely heard in this House a piece of Government legislation introduced that attracted so few friends. There has been continuous criticism of the Bill from all parts of the House. The Government would do well to heed those views. Inevitably, we shall be dealing with particular aspects of the Bill over the weeks ahead.
However, basically the Bill is unacceptable. It is unacceptable for one important reason. We are reminded, day in and day out, that this country is facing a severe economic crisis. The public sector borrowing requirement has got out of hand. Our balance of payments has got out of hand. The question on any piece of legislation now introduced in Parliament should be, "What will it contribute to solving those problems?" I must say to the Minister, from the comments that have been made in this House during the debate, the Bill will make no contribution whatsoever to improving the economic situation in this country at this time of need. Therefore the Bill does not deserve support on that simple principle.
My only justification for speaking on the Bill is that for 11 years I was a member of the British Railways Board, and for a similar period was chairman of Scotrail. I remember that my Minister was the noble Lord, Lord Peyton of Yeovil. He did not appoint me to the board but I had served five years on the board and the Minister was good enough to send for me—a thing that rarely happens to non-executive directors in nationalised industry.
The Minister said, "Lord Taylor, I did not appoint you to the board. It was the previous Minister. But I should like to try out some ideas on you. How do you feel about separating the track from the running of the railways? Let's give BR the responsibility for the track and let's have private franchisees running the railway". I said to the noble Lord, Lord Peyton, who was then Minister for Transport—and since my five years were up anyway—"I don't think it is a very good idea. I believe that railways are a totally integrated operation, and to separate them is unwise". The Minister replied, "I'm going to appoint you to the British Railways Board for a further five years". I believe that that is somewhat indicative of where the sympathies of the noble Lord, Lord Peyton of Yeovil, rest in this matter.
A great deal has been said about this measure which will make railways more efficient if one hands them out to franchisees. On what assumption does one base that view? The railway record of efficiency is well established. What are the comparisons of efficiency? Let us consider continental railways. Several speakers 1482 have referred to them today. The total train kilometres per number of staff employed is 3.42 in Britain; 1.52 in Italy; 2.46 in France; and 2.57 in Germany.
In terms of productivity and efficiency in running the railways, British Rail is ahead of the continental operators. We are doing it a disservice, if we assume that British Rail is somehow inefficient because our train was late last week on our journey home or there was some other minor little upset.
Similarly, in terms of productivity of staff, I notice that in 1980 there were 178,000 staff. Today the figure is down to about 130,000, covering the same mileage. There we have vast productivity gains in BR. Who will run the railways? Who are the magic men who will suddenly produce greater efficiency in the network? The Government are taking an unwise gamble in what they propose in the Bill.
I regret to say that at present, when British Rail has so many problems—the difficulties with the Channel Tunnel on its doorstep—and with all those problems ahead, the Bill occupies a vast amount of management time which cannot be justified. It is a big business that we are talking about, running 16,000 trains every day, with 762 million passengers in a year in a business with 130,000 staff. That is big business which requires management skill, expertise and application. Into the midst of all those responsibilities, this nonsense is injected. I say to the Government that they are doing no service to British industry by disrupting an important business in this way.
Various speakers have already mentioned the vast amount of bureaucracy involved in the new arrangements, together with 25 or 30 separate operators. We shall have five new government departments, Railtrack with its board, the franchise director, the regulator, the health and safety side. Then we shall have a joint industry board which will deal with through-ticketing. It is a vast bureaucracy which will sit on top of a major industry. No one would run an industry in that way; ICI would not do so. There will be this vast imposition of bureaucracy crippling the organisation and occupying management time and money. It is estimated that that imposition will mean at least £500 million per year in additional costs and overheads.
Thus, I believe that we ought to look at the legislation as businessmen would look at it. I have no hang-ups about privatisation. When I was on the railways board, I supported the privatisation of British Transport's hotels, to get them out of the way and let people run the railways. Hotels are a different business. They were sold in the market, far too cheaply, I may say.
With privatisation, if we go to Liverpool Street and look at Broadgate, it is a remarkable monument to the success of joint enterprise in the development of property. All such activities are to be encouraged. I have no hang-ups, no doctrinaire views about privatisation. However, this legislation is different. Why? British Telecom and British Gas were profit-making organisations; and, of course, it was easy to sell them in the market, at the market price per share. This is not that kind of business. At the end of the day, it will require a further injection of 1483 government subsidy. We shall have to pay people to run the railways, which is a different matter from going to the Stock Exchange and buying BT shares in a profit-making organisation, it is an entirely different organisation.
It is not within the powers of the House to reject the Bill; but—by golly!—it will be extremely difficult to make it a reasonable Bill, even with a vast number of amendments.
§ 6.55 p.m.
§ Lord Marlesford
My Lords, I seek to detain your Lordships for only a few moments and I apologise that, due to a long-standing previous engagement, I shall be away later this evening.
I am pro-privatisation of British Rail. I therefore wish to support a government Bill which achieves that objective. Why am I in favour of privatisation? There are two classical reasons for privatising which have been proved in the case of industries such as British Telecom, electricity and others. One is to get private capital into it. No one has yet found a formula whereby it is possible to get private capital into a government-owned industry which is not part of the PSBR. People have tried for years to do so. They have not succeeded and I do not think they ever will, because that is how it is defined.
Secondly, it is a question of the management. I spent four years on the Anglian board of British Rail until June last year. I must confess that it was a dismal experience. As your Lordships know, until June last year each of the six regions of British Rail had its own board consisting of the executives responsible for the region and six, seven or eight non-executive directors who basically gave their services free. I think we were paid £1,000 a year. We did it because we wanted to try to contribute to British Rail.
I am afraid that I found the management—and I speak now as one who saw it at the Anglian board level, not at the main board level, from the inside—woefully weak and inadequate. First, there is a very inward-looking culture in British Rail: the NIH (Not Invented Here) factor is strong. I believe that the noble Lord, Lord Rodgers, referred to it. The members are pretty undynamic and there is little imagination and innovation. Even when one can persuade them to do something, it does not always happen.
To give an example, I should be the first to pay tribute to the great achievements of British Rail in the redeveloping of Broadgate, to which the noble Lord referred, and the absolutely splendid station which we now have at Liverpool Street. It is a pride of Britain. I give much credit for it, incidentally, to a former colleague of mine at the Economist who was at that time on the main board of British Rail, Simon Jenkins. He ensured that the new technology was combined with the best of the old architecture. The result is superb.
During the inevitably difficult period of transition while the station was being built British Rail had to handle—and it managed it very well—all the passengers. I wanted people to look forward to the excitement of the new station, as we enjoyed looking 1484 forward to the M.25 when it was being built. We followed progress with eager anticipation. I suggested that there should be a poster on each station with three simple messages. The first was that the reconstruction was taking place, that it would be a superb station in the end and that it was being financed by redevelopment and therefore would not cost individual passengers anything. The second was that it would be a difficult time, but requesting tolerance. The third was the date on which people could anticipate using the lovely new station.
It took several months to persuade British Rail to do that; then it agreed. Nothing happened. So one waited. One was then told that British Rail had a computer system for allocating posters and that it was necessary to wait until the computer system operated. Eventually, some posters appeared on some stations. But on many stations posters did not appear. Why not? The computer system had not been programmed to include those stations—a silly example, but one of those found at the medium level on the inside. It explains why the public becomes frantic with what happens on British Rail. One sees little examples.
There was very little discipline. British Rail would use in-house staff to paint stations, for example. It was wildly inefficient. Half a dozen people would sit happily in a bus playing cards all day and no one would stop them. The job could have been done infinitely more economically by employing outside contractors. Somehow, nobody could get a grip of the situation. The administration of the board was quite appalling. The minutes were months late. We were once given a slide show with the slides upside down. The show continued to the end with the slides upside down. Working lunches were arranged but the food failed to arrive. So it went on.
Even today there are many examples of lack of proper service. As for communicating with passengers, how many times have noble Lords arrived at their destination on a train which was woefully late to hear the announcement, "We apologise for any inconvenience caused". The word "any" is rather provocative. I mentioned that fact ages ago and said that it might be better to leave out the word "any" because it implied that on the whole one should not complain. But it still goes on. Next time one is on a late train there will still be the apology for any inconvenience caused.
British Rail has just produced a timetable for my own regional line between Ipswich to Lowestoft on which all mention of eight of the 12 stations served has been totally omitted. Naturally, there has been an outcry. When asked the reason, the answer was, "It saves money. The alternative is not to have a service." One cannot accept that kind of argument. It shows a very low standard of management.
I have been lucky enough to experience another industry; namely, the electricity industry. I was a member of the Eastern Electricity Board before it was privatised. I am still a member of it. There was a very different attitude towards privatisation in that industry. The electricity people longed for privatisation and for the opportunities that it would bring. But the rail people are fearful. They feel—perhaps with 1485 reason —that the management will not survive in the rough, tough outside world. But I am pleased —or perhaps sorry—to say that British Rail management can set its mind at ease. It is not threatened with privatisation. It need not fear any serious entrepreneurial invaders.
The reorganisation —which, incidentally, abolished the regions and with them the regional boards so that, at a stroke, the chairman of British Rail denied himself some 40 outsiders in a business which desperately needed outside influence and advice was in a sense a poisoned pill, designed by British Rail against privatisation. The chairman, Sir Bob Reid, persuaded my right honourable friend Mr. Rifkind to suck the pill. Mr. Rifkind moved and the bait was passed to my right honourable friend Mr. MacGregor, who swallowed the pill.
I believe that the central premise of the Bill—that responsibility for the track should be split from the responsibility for operating trains—is fundamentally unsound. That point has been made from both sides of the House, pursuing totally different approaches. There are several reasons for it. First, a railway is the track, signalling and infrastructure on which trains of various sorts are run. One must doubt whether there will be serious investors prepared to invest in the best modern rolling stock for a rail track over which they have no control. Again, that point was made a number of times, particularly tellingly by the noble Lord, Lord Eatwell.
There will be plenty of people who will offer fly by night services to make a quick buck, run them and then bail out. That is not desirable. It is not a good thing. For that reason at least I should be in favour of British Rail being allowed to compete for the franchises. It would be undesirable to have people of the sort I have described.
A point made earlier by my noble friend Lord Wade was that there was some analogy to be drawn with roads: a road could be publicly owned and a perfectly good commercial service could be run on it. But there is no analogy. A motorway is a much simpler proposition than a railway track. Therefore, the argument is fundamentally flawed.
I believe that the right way to privatise is by region. I agree with the noble Lord, Lord Greenhill, who disagreed with the noble Lord, Lord Marsh, about the bad old days of the companies. Those companies had a tremendous pride. They built in this country a railway system which was the envy of the world. Its was the source of a huge export business. We built railways all around the world. Most of the South American railways were built by British engineers, British capital and British know-how.
I too have a railway background. Over a 100 years ago my grandfather started work as an apprentice at Crewe and ended up general manager of the Great Northern Railway. Of course the railways had a difficult time and one understands why they were nationalised after the war. But I do not believe that that is a reason for their not being privatised today.
As one who believes in the privatisation of British Rail, I ask whether the Bill can be improved to make it better than nothing. I fear that so far nothing that 1486 my noble friend the Minister or anybody else has said has persuaded me of that. Nevertheless, let us hope that some imaginative amendments will be brought forward at Committee stage. Even at this late hour let me ask the Government to reconsider the whole of this proposal. Privatisation has been very successful with such enterprises as British Telecom and British Gas; and indeed with water, where investment is being made which could never have come from the PSBR because the money would not have been available. Let us hope that we do not spoil the record of privatisation with this ill-conceived measure.
§ 7.6 p.m.
The Earl of Glasgow
My Lords, I do not believe that I have ever felt so deeply depressed by any recent government legislation as I have done by the Railways Bill. Against all reason and most professional advice, including it seems to me the between-the-lines advice of the Transport Select Committee Report, the Government are determined to push ahead with the Bill. In the most optimistic scenario it can only give us an improved train service on the already profitable or nearly profitable lines. In the worst and most likely scenario it will give us a more expensive, fragmented and ultimately greatly reduced railway service.
Great Britain is an almost perfect size for a comprehensive railway network. The network has become an essential service and an integral part of the nation's infrastructure. It is here to get businessmen from one city to another. It is here to get commuters to work in the morning in a reasonably contented frame of mind. It is here to enable a family in Glasgow to visit grandmother in Dorset. It is here to get a farmer's wife in the Western Highlands to the shops of Inverness. It is here to get a hiker from Birmingham to the foothills of the Lake District. It can be a lifeline to the man who is out of work and who needs to travel to a neighbouring town for a job interview.
The railways are here to serve the nation and help to make it function. The rail network is one of the elements that help to make up what some might call the quality of life. It is particularly vital to the less well-off. It seems to me appalling that it should be subjected to an ill thought-out ideological experiment which, so far as I can make out, will not even save the Exchequer any money. No other country, not even Sweden, has attempted anything so irresponsible.
At present we have a reasonably comprehensive unified railway network. It can take one from Penzance to Aberdeen in 13 hours with only one change. It is not a perfect railway network. It is desperately in need of capital investment, as many noble Lords have already mentioned. But in most cases, particularly on InterCity services—and even the Government admit it—every year it improves in efficiency. Although it is presently divided into several different administrative departments—some of them are called "profit centres", which is a dreadful word —responsible for different functions or areas of the country, nonetheless it is still one unified network. Despite its well publicised shortcomings, which have been pointed out by many noble Lords on the other side, it works.
1487 However, the Government want to break it up into dozens of separate bits. They even want to break up InterCity, which, as the noble Lord, Lord Mountevans, said, has passengers travelling at high speed from one end of the country to the other. They want to split it up into six or more different companies. That is being done, apparently, in the name of "greater efficiency through competition" and "to encourage private investment". I cannot see how the introduction of dozens of so-called competing companies can produce greater efficiency over the whole existing network. And how can it encourage substantial investment when a franchisee has no guarantee of retaining the franchise after a few years? To me it seems like the greatest act of government vandalism in recent history.
As other noble Lords have said, I am not against privatisation when it generates genuine competition, or even when it introduces more efficient management to a near monopoly like British Telecom. Privatisation in those cases can prove to be of great benefit to the community. But the breaking up of British Railways into different companies simply creates problems. It does not solve any.
There are the problems of cross-ticketing; delays as companies fail to agree deals with one another; there is the extra paperwork and red tape, which many noble Lords have mentioned; there is the problem of one company's train breaking down along the line and holding up another company's train; there is the problem of one company suing another, and there is always the possibility of one or more companies going into receivership or being suspended and a whole service being temporarily put out of action. Of course, the Government acknowledge those potential dangers and the Railways Bill gets bigger as it rightly introduces more safeguards, restrictions and conditions for the franchise director and the regulator to deal with in their determination to block up the holes and keep the Bill afloat. I cannot see how it can be anything but a disaster, and it is all so unnecessary.
But there is a more fundamental reason why the railways should not be privatised; that is, because the underlying issue is only partly to do with railways. Many noble Lords, particularly on this side of the House, have already mentioned the real issue of the lack of a comprehensive transport policy. It is surely a desired objective of all political parties to get as much traffic off the road as possible and persuade the drivers to use—I was going to say public transport, but of course I mean the railways. Just think how much money could be saved on road repairs and the non-building of new motorways if, say, one-third of the present traffic was taken off the roads. Surely the Government do not think that that could be achieved by privatising the railways. We cannot expect the private railway operators to concern themselves with saving the Government money on motorways.
Leaving freight aside, there are three essentials if we wish to persuade present motorists to take the train. Trains must be more reliable and efficient—I think everybody agrees with that. For instance, they must arrive on time and be comfortable to travel in. They 1488 must be convenient. In other words, they must be suitably frequent and there must be somewhere to park one's car when one arrives at the station. Most essential, they must be cheaper. To outweigh the undeniably greater convenience of the car, the rail fare must be considerably cheaper than the 30p or so a mile that motorists usually fail to take into account when they drive anywhere.
I admit that it is possible that a private company might succeed in providing a more reliable and efficient service —even a more convenient service—on specific lines; almost certainly those that InterCity are already making profitable or nearly profitable at the moment. But I find it impossible to believe that dozens of companies working separately could produce a more efficient and convenient service throughout the whole present network.
Even if that were possible, there is no way that a privatised railway could produce a cheaper service. When the Government express the hope that the Railways Bill will result in a cheaper fare structure, who are they kidding? Inevitably, fares will be kept as high as the market will bear. That is what the law of market forces is all about. That is what I do in my small business in Scotland—I charge as much as I think I can get away with; not too much or I lose customers, but as much as I think the customer will be prepared to pay. Even with the promised government subsidies to help support unprofitable lines, the operator must charge the highest fare his market will accept, otherwise he will be letting down his own shareholders. In most cases it will be the businessmen and the long-suffering commuters who will dictate what the market will bear. As long as there are enough passengers to pay the higher rate there will be no incentive for the privatised companies to artificially reduce them. It will therefore seem more economic and practical for everybody else to continue to use their cars and vans, crowd the motorways, clog up the towns and emit their toxic fumes into the atmosphere. Travelling of any sort will become less and less possible for those on low incomes.
I cannot see how privatisation of the railways, as proposed by the Government, can produce a more efficient overall network, attract substantial new investment (which everyone agrees is vital) or establish a cheaper fare structure. Only a nationalised railway industry in government control has the power, if it has the will, to introduce significantly cheaper fares and provide the necessary investment which is essential if we really wish to attract a significant number of car owners back on to the railway.
It seems that the Government have decided to abrogate their responsibility to provide a cheap and properly financed railways system and to pass as much of the burden as possible on to the private sector, whose interests are necessarily different to those of the country.
In my many activities in Scotland—I do a lot of hobnobbing with ex-Thatcherites and industrialists —I have yet to meet anyone who thinks privatisation of the railways is a good idea. Others have made this point, particularly noble Lords from Scotland. Some, like me, think it is a mistake in principle and a threat 1489 to our quality of life. Some think it unworkable or unlikely to be an attractive proposition to potential franchisees unless they are given a freer hand than the Government are quite rightly prepared to give them. The nearest I get to support for the Bill is from those who have had bad experiences and who say that it cannot be any worse than we have at the moment. Well, it certainly could.
I know that there are many Conservatives in the Palace of Westminster, as well as in Scotland, who are just as apprehensive about the Bill as we are on this side of the House. And so I have this probably naive hope that some of them might succeed in putting on pressure to save the Government from themselves; and that it is still not too late for the Government to change their mind.
§ 7.17 p.m.
The Earl of Lindsay
My Lords, much has been said, using fairly adventurous language, about the parlous state of the railways, the problems endured by passengers and even the problems endured by regional directors, such as my noble friend Lord Marlesford, the disintegrating state of government transport policy and the poor prospects for the Bill. I should therefore like to draw your Lordships' attention to a slightly different perspective. Given that some of the noble Lords who preceded me were from Scotland, it is a Scottish perspective. In response to the noble Earl, Lord Glasgow, I would say that there is a lot of enthusiasm within Scotrail, for instance, for some of the opportunities which the Bill will offer.
In the 30 years since Dr. Beeching's report, Scotland's railways have seen 50 stations open or re-open. By next year that figure will have risen to 63 or possibly more. That is despite a five-fold increase in car ownership in Scotland over the same period and a vastly increased road network. Scotrail is currently attracting 50 million passenger journeys a year, with over 1 million on the Glasgow to Edinburgh route —despite the fast motorway link between the two cities. Scotrail income is above budget; earnings are up 9 per cent. on last year and 30 per cent. up, with costs 21 per cent. down over the past six years—that, despite the recession.
My noble friend the Minister mentioned the rising level of public dissatisfaction with the railways at the moment. In fact, Scotrail is the only regional network which delivered passenger charter targets on every one of its routes with customer complaints in Scotland down by 18 per cent. Those are stirring results for any modern rail system. Much is due to Scotrail's excellent management record. Also playing a part, I imagine, is Scotland's unique geography. But in this day and age such factors, important as they are, do not by themselves guarantee new lines, new passengers and a strong performance in difficult conditions.
The critical enabling factor in Scotrail's expanding network and expanding passenger base is the extent to which strategic planning and investment have been pursued in partnership with wider regional interests. It is therefore of paramount importance that government policy both within and beyond this Bill enables 1490 the restructured rail networks to continue to become involved in long-term, broad-based partnership opportunities.
The evidence speaks for itself. One of the most successfully integrated transport strategies is in Strathclyde. Since 1975 Scotrail has worked with Strathclyde Regional Council through its passenger transport executive on the largest rail network outside London involving 161 stations and 282 route miles. Since 1975 two lines and 17 stations have been added. By the end of this year two further lines and 10 more stations are due to open, and a further line is now in the planning stage. During the 18-year partnership joint strategic planning and close liaison have produced not only an ever-improving service year on year but have enabled the PTE to reduce its subsidy from £50 million in 1975 to £32 million in 1992–93. An improving service based on a reducing subsidy is a ringing endorsement of that partnership and represents value for money for passengers, local interests and taxpayers alike. In his opening the Minister mentioned that there was a need for railways to respond to the needs of their customers. It is just that sort of partnership that has managed to do so.
From Scotrail's operational point of view the Strathclyde-PTE partnership involves just 14 per cent. of its route miles, supports 68 per cent. of its trains and generates 42 per cent. of its annual income. This calibre of partnership deserves both respect and encouragement in government policy. In all areas of Scotrail the benefits of partnership projects are evident. Some—as in Strathclyde —are straightforward two-way ventures with a single strategic body, such as Tayside, Fife, Highland or Central regional authorities. For example, in the case of Grampian Regional Authority new stations have been opened and others have been improved. The feasibility of a cross-Aberdeen suburban service has been established, and planning for new housing around suburban stations is under way to prevent congestion in Aberdeen.
At the other end of Scotland, the Stranraer line, which Beeching wanted to close, is going from strength to strength. In the case of Dumfries and Galloway, the new stations being jointly planned include Gretna, so noble Lords will soon be able to elope for no more than the cost of a day return ticket. It must also be stressed that the regional authorities are vital in the creation of concessionary rail fares for senior citizens, the blind, the disabled and students. To Scotrail, the gross revenue from these regionally-underwritten concession schemes is £5.8 million, so it is an effective method of enabling rail travel. It is also further proof of the wide benefits that can result from close partnerships between railways and regional authorities. Joint ventures with multiple partners are rarely as simple, but they remain significant. A prime example is the re-opening of the Bathgate line in 1986 where Scotrail was involved with Lothian region, the district council, Livingston New Town, central Government and the EC. However, the benefits have been huge and exceeded all expectation with half a 1491 million passengers being handled in the first year. Two further lines are planned in central Scotland on the same multi-partner basis.
It goes without saying that creating half a million rail journeys from scratch benefits rail users, non-users, businesses and the environment alike. Job and residential opportunities widen, road congestion and road accidents ease and the land-take and funding required for road improvements are reduced, as are energy consumption and air pollution.
The economic and environmental benefits of all partnerships are clear. However, it is important to emphasise the significant advantages enjoyed by simple partnerships between two strategic bodies. The Scotrail-Strathclyde PTE venture owes much of its success to Scotrail representing a rail network within a region and the PTE having a complete overview of that region, a single source of funding for that region and an ability to initiate and develop strategic priorities across that region. It is more difficult for those joint bodies that incorporate multiple interests and multiple funding sources to act with the same unity of purpose, momentum or flexibility. A telling illustration of this is the completed South Fife to Edinburgh Rail Study which has involved Scotrail, Fife and Lothian regional councils, Fife Enterprise and the Scottish Office. With Scotrail currently handling 60 per cent. of the peak commuter traffic across the Forth, the study proves the strategic case, on economic and environmental grounds, for three extra stations and new rolling stock. The co-operation between the numerous partners has been crucial, but the £7½ million needed to implement the scheme is still being sought.
That does not compare favourably with Strathclyde where, for instance, Scotrail and the PTE have a £51 million scheme to re-open 13 stations; nor does the delay in funding make sense given the growing pressure for a new Forth road bridge at a cost of some £300 million to £400 million. This situation supports the case for a strategic PTE around the Forth transport hub similar to that which exists around the Clyde. The argument for an additional PTE is strengthened yet further if one considers the multi-partner scheme proposal for new stations, new rolling stock and new time-tabling in the context of this Bill. Instead of Scotrail sitting down with four outside partners, as has happened, the gathering will consist of the two regional councils, one enterprise body and the Scottish Office with the franchise operator, Railtrack, the franchise director and possibly the regulator. In addition, the operator will have to involve one of the separate leasing companies as well as consider with any franchise partners to what extent it is worth investing in a scheme given the diminishing period of the franchise. Similarly, the Scottish zonal office for Railtrack will presumably have to liaise with the London headquarters.
I have not cited this example because I am opposed to the Bill. I support the Bill in principle, and I know that there are those within the railways who also support it. I cite it because it illustrates that there is already a need for a PTE around the Firth of Forth, 1492 and that the effects of this Bill can only intensify that need. It illustrates by default and through comparison with the Scotrail-Strathclyde PTE partnership the benefits that evolve where rail interests and a single transport authority can integrate planning and investment.
There is perhaps one further conclusion; namely, that co-ordinating planning and investment may also be easier where the rail operator has some control over the management and running costs of his own infrastructure. This involvement need not involve full vertical integration, despite what other noble Lords have said, but in Scotland, more than any other area outside the Isle of Wight, there is a sensible case for involving the operator to a greater degree in his own infrastructure. It would enable a more strategic, swift and flexible response to opportunities and a much simpler allocation of responsibilities with project partners and passengers.
To date the level of rail investment committed by Scottish authorities and the Strathclyde PTE has been impressive. I therefore welcome the assurances provided both in the Bill and by my noble friend about their continuing involvement and the safety of their investment as franchises come and go. If a rail network that integrates effectively and efficiently with wider interests can maximise its potential, the role of the strategic transport authority as a provider and partner takes on greater significance not only in the Bill but also from the point of view of additional proposals for local government reorganisation. That will have an impact on networks such as Scotrail which has worked so closely with regional bodies. The advent of a greater number of smaller single-tier authorities in their place can only complicate the opportunities for strategic rail partnerships unless, as the Government consultation document recognises, transport planning is assigned to larger bodies. That must be the case, especially around transport hubs such as the Clyde and Forth.
Given the widespread benefits that accrue from integrated transport policies for operators, users, non-users and so forth, the final point I make concerns the Scottish Office. I believe that both because of this Bill and local government reorganisation now is the time to take a fresh look at how railways in Scotland are funded. My right honourable friend the Secretary of State for Transport spoke about creating Scotland's railways, yet unlike Scottish roads, where funds are controlled and allocated by the Scottish Office, funds for the rail network will continue to be controlled from London.
If one accepts the need for a strategic approach to transport planning, it is hard to dispute that the rail budget should be devolved to the Scottish Office and either separately ring-fenced or brought together with the roads budget. There has been some resistance to date on the grounds that separating out the Scottish PSO allocation in order to hand it to the Scottish Office would expose the level of subsidy to Scottish rural routes and that that may lead to Sassenach accusations that the Scots are getting too much. In the past I have had some sympathy with that argument, but the Bill will introduce a comparable level of 1493 transparency so that the logic of that argument no longer applies. If we cannot enjoy the peace that comes from obscurity we may as well have greater control over our destiny. A detailed assessment of the funding of individual rail services has to be made by the franchising director in liaison with, among others, the Government. In England it makes sense for this liaison to be with the Department of Transport because of that department's existing responsibilities for parallel parts of the infrastructure.
In Scotland it is the Scottish Office which judges the parallel priorities controlling, for example, a roads budget of £448 million in 1991–92. It is the Scottish Office's industry department which is principally concerned with inter-urban movement. Its current focus may be primarily on roads, which is the main competing mode to rail, but this is the body that could most effectively take a single transport funding overview of both road and rail requirements in Scotland in the same way as the Department of Transport does in England. With revenue support grants for rail services being such an important component of transport policy, and rail services generally catering for flows of more than local significance, it makes sense to bring decisions on the PSO allocation to the same body that makes decisions on the trunk roads.
It is the Scottish Office, therefore, not the Department of Transport, which is in a better position to act as liaison with the franchise director on the rail allocation. In addition, the strategic influence that this would give the Scottish Office would be particularly welcome where the franchising director is having to deal, through lack of a PTA, with a large number of smaller authorities. This will be of especial importance after local government reorganisation.
On rail initiatives generally, it has often been the regional authorities in partnership with Scotrail that have developed policies aimed at reducing urban congestion and reducing long-distance car commuting by promoting and investing in rail services in and out of the major cities. After local government reorganisation the only sensible strategic viewpoint outside a PTA will be in the Scottish Office. It is there that control of the rail allocation must reside.
In all these aspects, the Scottish Office embodies sufficient proximity to respond sensitively to local and regional requirements while retaining sufficient breadth of responsibility to incorporate wider strategic objectives. From a more political perspective, delegating the Scottish PSO to the Scottish Office conforms to the subsidiarity principle; it could be used as part of the Government's professed aim of increasing the remit of the Scottish Grand Committee; and it may become significant if EC funds are available to infrastructure obligations which are clearly a regional responsibility.
Because of this Bill there are some very strong grounds for welcoming the PSO to control by the Scottish Office. There are some very strong grounds for introducing further PTEs, especially one around the Forth. And there are the strongest possible grounds for maintaining the opportunities for rail 1494 networks to become involved in strategic co-partnerships with wider bodies. Given their successes, they must continue to function whatever the future framework of the railways.
The proposed early franchising of Scotrail will make Strathclyde the first PTE in Britain to be involved in the new structure. Because it has had such an important role, and has achieved so much, it is vital that all parties get the new structure right. The new arrangements for rail and local government must not forfeit such productive co-operation.
My noble friend the Minister borrowed a quote from the Economist that stated that the strength of the MacGregor proposals lies in their flexibility. I agree. This flexibility, however, must extend to the partnership schemes achieved north of the Border. As Scotrail has shown, they are the most effective and prudent mechanisms for putting passengers and trains back on the tracks.
§ 7.32 p.m.
§ Lord Greenway
My Lords, although sorely tempted, I do not intend at this late hour to go into the pros and cons of the privatisation of the passenger business. Instead, I shall concentrate my few remarks on the freight side of the railway business.
We all know—and many noble Lords, including the Minister, have referred to it already this afternoon —that freight has been leaving rail steadily for a long time in favour of road, leading to our highways becoming increasingly clogged by juggernauts, to the detriment and frustration of all of us who have to use them. I had the misfortune to have to drive up the A.1 the other day to Newcastle. I was simply appalled at the number of lorries which totally blocked the dual carriageway virtually all the way. Some way has got to be found, both for economic and, increasingly importantly, for environmental considerations, to get more freight back on to the rails.
The freight industry as a whole favours the privatisation of the freight side of the rail business; but in order for the Government (who, to be fair, recognise the need to carry more freight on rail) to achieve their aim, there has to be a great deal more clarity in relation to how we are to proceed. There are still far too many areas shrouded in grey mist or even (dare I say it?) in the wrong type of snow.
Quite apart from any potential investors, our sea ports, which play an important part in the movement of freight and which have a long historic connection with the railway, are profoundly worried about the uncertainty of the immediate future as proposed by the Bill. What, for instance, is to happen to the Freightliner service which carries containers from the ports to the inland depots. Uncertainty also exists with regard to the future of rail freight distribution.
The Government have announced that the private sector is to be asked how it might become more involved in the Freightliner business of British Rail. Perhaps I may make a plea that Britain's ports, and especially the larger container ports, are offered a major role in this consultation process. The network that emerges from these very necessary changes will affect freight transport for many years to come. I 1495 understand that there are already moves within the ports industry to discuss just what kind of network and private sector rail system should emerge from the consultation and there may even be a possibility at a later stage of a port-led joint venture company.I connot stress too highly the importance of consultation throughout the privatisation process, both with our ports and with other organisations such as the Rail Freight Group, the British International Freight Association and the Railway Industry Association.
Above all, we must recognise that there is great potential for rail freight volumes to increase, so long as rail routes between ports and inland terminals continue to be provided by Railtrack. The port of Felixstowe, for example, currently handles more than 1.2 million containers a year but only 140,000 of those go by rail. Provided access charges are modest, there is no unearthly reason why that number should not easily be doubled. But that will happen only if customers have the confidence that the railways can offer a quality service with the kind of flexibility that British Rail is just unable to provide at the moment. But it must be a service at a competitive price and we simply must ensure that a new culture is brought to rail freight to reduce charges. To be fair, the. Government have already made encouraging moves in another place in bringing forward measures to assist with track revenue charges and freight facilities. Those are most welcome; but will they be sufficient? However, any new charging system must be both fair and transparent and must encourage optimum use of less heavily used track.
I should like to address my remaining remarks to the question of open access. It is a principle which all in the freight industry welcome; but there is one aspect of open access which concerns some port authorities which already own private railheads as well as other private sector companies which operate their own depots. The Bill makes provision for mandatory open access, at the direction of the regulator, to maintenance depots providing repair, maintenance and overhaul services for wagons and locomotives. The breadth of this provision is such that private sector companies, some of which have already invested substantial sums of money in private rail maintenance facilities, are now being threatened with the prospect of those facilities being subject, at the direction of the regulator, to mandatory open access by others, including possibly competitors. It is the belief of many in the private rail freight sector that certain amendments are required to make a clearer distinction between those BR depots forming a constituent part of the BR network at the time of Royal Assent and private rail maintenance depots.
The effect of any amendments must be to exempt current and future private rail maintenance facilities and railheads, such as those in our ports, from mandatory open access by other parties. The virtue of open access to those BR maintenance facilities existing at the time of privatisation will be retained and the important principle of all rail maintenance facilities needing to be licensed will be preserved.
1496 To conclude, whatever mauling this complex Bill may receive in Committee—and to judge from some of the speeches we have heard this afternoon, it is in for a fairly rocky ride —let us at least get the freight side of it right.
§ 7.38 p.m.
§ Lord Cochrane of Cults
My Lords, I am one of those who stands up and says, "I welcome the Bill". I welcome it with enthusiasm because it shows that the Government have recognised that there is a problem with the railways. However, I have to say that the purpose of the Bill—to try to put things right, as explained by my noble friend the Minister—probably slightly conceals the fact that a good part of the exercise is designed to reduce the public sector borrowing requirement. But I am doubtful whether that is a valid reason for all that is being attempted.
Certainly, with the way the railways are organised at the moment, when anything goes wrong the Government get the blame. One turns on television at breakfast time and there is a burly man—persuaded believe by virtues of the Benches opposite—saying in a very loud voice, "What are the Government going to do about it?" As usual with government, there is absolutely nothing that can usefully be done about it.
Then, of course, there is the great business with the Treasury second guessing, and so on, all the way down to an investment decision. That causes a great deal of administrative delay. It is rather like our local maternity hospital which built a magnificent new delivery suite. It was 10 years in gestation. It was built just at the time when all the storks were killed by the pill. The building was never used and a great deal of money was wasted.
Unfortunately, this Bill is far too complicated. It is excessively complicated in its legal and operational arrangements. I venture to suggest that it deserves the rebuke given, I believe, by the grandfather of my noble friend Lord Brabazon to an aircraft designer. When he was asked his opinion of the aeroplane he said it would not fly. Those were the days when, if one was really knowledgeable, one could tell by looking. When the designer asked "What shall I do about it?" the answer was "Simplify and add more lightness". That is what this Bill needs.
When one hears that there may be as many as 160,000 agreements required to fully franchise British Rail, let us imagine that we have frightful, cheap-jack lawyers costing about £1,000 each. That is £160 million, if I had counted the noughts right. Who is going to pay for that? Why, the passengers, if any. So this Bill has to be simplified.
Another aspect is that, when looking at the Bill, the budget of the franchise director with which he supports franchisees will be used by the franchisees whom he chooses to pay in part their Railtrack bills. There is a fixed limit put on the franchise director's budget. Where does that lead us? It is a very curious situation where one has spent all his budget and cannot increase it and the other is asking for more because he has been told to earn a proper rate of return on his assets. That seems to me likely to cause the most frightful interdepartmental struggle
1497 Some noble Lords may remember that I introduced last year the Bill with the dullest title which has troubled your Lordships for some time. That was the Gas (Exempt Supplies) Bill. The only reason I mention that is because it was to do with two regulators quarrelling with each other. Hopefully, that will be resolved tomorrow. But it has nothing like the complication which exists in this business.
Perhaps I may mention just a little of the flavour of the legal complications of the Bill. Clause 6 states that "no person shall own a network, a station or a light maintenance depot." Does that mean that he may own a heavy maintenance depot provided that he does not do light work? What does it mean? It is absolutely meaningless. If he is found owning one of those facilities he can go to prison or be fined the maximum amount, provided that my noble friend the Lord Advocate or other person agrees. That seems an excessive way of going about the matter so I shall not bore noble Lords any more with that.
With the Treasury second guessing investment decisions there has been a very great reluctance to invest. It has been rightly said by many noble Lords, particularly by the noble Lord, Lord Marsh, and others with great experience, that we lag behind the amount spent on the railways in Europe. It is fair to say that they have probably got it slightly more right' than we have. We have under-invested.
We have also very much under-invested in electrification. The case to be made for that is very strong and is increasingly so. Yet throughout the time I have been interested in railways, investment has only been achieved with great difficulty. The recently electrified main line to Edinburgh was thought of in the 1930s. It reminds me of what was said about people in charge of investment decisions in the Treasury. They really felt that electrification was almost a kind of secret vice like enjoying high tea. So the case for electrification never got a fair hearing.
The mega-projects have grabbed all the investment money. It is not really open to my noble friend the Minister to say that record levels of investment are taking place because while that of itself is true, it is not true of the existing railways. It is the new railway which is getting the money and we have still not solved the problems of maintaining the old.
We have this Bill and it has stalled investment but investment has to continue. We have to make sure that there are adequate forward programmes for rolling stock. The £150 million is welcome, but nothing has happened yet in terms of a solid order or even any agreement—unless I am out of date—as to what rolling stock is to be ordered with it.
Noble Lords will have noticed that there is a wholly disproportionate number of Scots here today. Four of us from Fife have spoken in this debate. I shall mention Scotrail briefly. It should be vertically integrated. However, my feeling is that the infrastructure should remain in the ownership of the Government, but the track and signalling, and those parts which are required to run the railway, should be within the ambit of Scotrail for the very good reasons advocated by my noble friend Lord Lindsay, who set it out in excellent detail. That will also help with the 1498 PTEs, which is very valuable. I shall not repeat his argument because it was too good not to be true. He put it forward very well.
Finally, I once asked the Scottish Office as to why it was it did not "do" railways. The Minister at the Scottish Office at the time said that he did not think he could remember but it certainly seemed right then. I am quite sure that Scotrail and the Scottish Office should be the operative system and that we should not have Railtrack, as understood generally within this non-flying Bill, in Scotland. That is the answer. We must simplify and lighten the whole Bill for the good of everybody; and within Scotland we have particular scope for doing so.
§ 7.47 p.m.
§ Lord Howell
My Lords, first, perhaps I may apologise to your Lordships for being absent for an hour while I was attending and participating in the memorial meeting for Lord Underhill. As I am sure the noble Lord, Lord Tordoff, will agree, there were several references to this debate and its appropriateness at that meeting. It was a very splendid and striking occasion. I thought that a word about it would be of interest.
The splendid speeches which have been made, covering almost every conceivable argument against the Bill—not least the devastating speech of the noble Lord, Lord Marsh, a former chairman of British Rail, and the speeches of my noble friend Lord Clinton-Davis, of the noble Lord, Lord Rodgers and of the noble Baroness, Lady Stedman, from the Cross Benches—mean that there is very little left to say.
Therefore, I thought that I would engage in a little theological dissertation for a moment or two in view of the fact that for the whole of the debate we have had the presence of right reverend Prelates. However, as is my good fortune, the moment I rise to speak about theological matters, they depart. Nevertheless, I shall not be dissuaded on that account.
The church which I attend has a great connection with steam railways and steam. The vicar, the Reverend Denis Claringbull, holds a steam festival and service each year which is attended by thousands of people. There is a great traditional interest in these matters. After church last Sunday, I had a disputation with him about the nature of prejudice, particularly prejudice arising from hidebound political theories such as we have in this Bill. I was hoping that a right reverend Prelate would adjudicate between my vicar's view—that this sort of political prejudice should be described as "dogma"—and my lay view, which is that it should be described as "theological". The vicar told me that it could not be theological because theology concerns itself with original sin and redemption and that therefore dogma was the proper description.
I am suffering another piece of bad luck. I wanted to make this comment to the House having listened to the speech of the noble Lord, Lord Boyd-Carpenter, who is also not in his place. I regret that I shall have to reply to his speech in his absence. The noble Lord made an extraordinary speech from which the only conclusion to be drawn was that people who work in the public sector, providing public services such as 1499 railways must be suffering from some form of original sin, being totally devoid of any connection with the profit motive and therefore unable to provide the quality of service which the public are entitled to expect. It is an extraordinary argument. I was hoping to ask the noble Lord whether he extended that theory to doctors, nurses, teachers and other people in public service or whether it was a doctrine of original sin that concentrated specifically on people who work in the railway service. However, that will now have to wait until another time.
As your Lordships will note, I believe that the Bill is a nonsense from beginning to end. I do not think that it has a redeeming feature. However, my greatest criticism is made as a realist, not a theorist. The Bill will not work in practice. The type of railway organisation which it seeks to present to the country, breaking up the network into 20 separate units, will destroy any national coherence in the industry. As we have heard, all the new companies in the 20 units will have to be regulated in considerable detail. Indeed, the Government have now had to concede that point. Regulators of one sort or another will exercise such detailed control over those companies by Acts of Parliament and regulations that I doubt whether they. will ever attract any investment. I believe that that was one of the points made by the noble Lord, Lord Marsh. I hope that the Minister will tell us how he is getting on in attracting people to invest. We all know that all the potential investors seem to be getting cold feet—and for very good reasons. But we need to be told.
I agree that the Prime Minister's own plan of returning to the old and ancient structures of the Great Western, the London Midland and Scottish; the London, North-Eastern Railway and the Southern Railway, seems much more sensible, although I accept the judgment of the noble Lord, Lord Marsh, that that structure was even more impracticable than this scheme.
The proposed system makes no proper technical provision for train staff. It will certainly increase fares and it fails to ensure any statutory provision for a national network of concessionary fares, about which we should all be concerned. Indeed, it is impossible to find anyone who wants this Bill. Whatever we think of the merits of renationalisation—and the Labour Party has gone a long way recently in saying that most of the former nationalised industries will not be renationalised—I am absolutely certain that if the Bill goes through, this industry will have to be renationalised by a future government because of the total chaos that will have occurred.
I do not know whether during my absence any noble Lord quoted the pertinent remarks of Sir Peter Parker, one of the more outstanding chairmen of British Rail. He wrote in the Guardian:Potential operators will not 'own' the service but have a short term franchise. The timetable will be specified by the franchise director, track charges and train paths will be owned by a leasing company while fares will be controlled. The driver, signal man and platelayer will work for separate companies".1500 That was a damning indictment of the scheme by Sir Peter. Taken together with the contribution of the noble Lord, Lord Marsh, it should convince the Government to withdraw the Bill and start all over again.
I am indebted to a very old railway friend of mine who served on the NUR executive, Mr. George Sharrat, who now lives in Southport. He wrote me a long letter the other day based on his personal experience as an operator. I should like to know what the Minister has to say about it. Mr. Sharrat refers to matters which are essential practice now on the railways in one company. He states that train crew organisation is of vital importance and is responsible for the implementation of 60 per cent. of railway safety regulations. The other 40 per cent. is shared between signal men and the permanent way staff. When drivers and guards report for duty, a train crew supervisor must be present to observe every man signing on. He must ensure that no employee who is about to take out a train is under the influence of drink or drugs, is suffering from any illness or is emotionally distressed in any way, having regard to the fact that such employees will be in charge of trains carrying hundreds of passengers. The train crew supervisor must ensure that every man is in possession of all relevant notices for that day's working. He must know about any changes in train movements that day. He must carry the BR rule book and hand lamps. It is vital that he signs the route card and protects those records in case of any disaster.
Mr. Sharrat asked me where such provisions are statutorily laid down in the Bill. He wants to know how we can ensure that all those absolutely essential practices will be carried out by the new companies that will operate the railway system. I took note of what the Minister said when he referred to safety. He said that all such provisions would be laid down in Clause 110 and that they would be operated by the Health and Safety Executive. Naturally, I have looked at Clause 110, but I find that it is woolly in the extreme. It makes no specific reference to any of those matters and does not tell us how such provisions will operate. Therefore, I have to ask the Minister whether he can find an answer to the question of whether all the orders covering all the matters that I have raised in detail will be placed before this House and the other place. Will they be debated? I ask that because we, just as much as anyone else, have an obligation to ensure the safety of the public.
I turn now to concessionary fares. The extent of the problem posed by concessionary fares seems hardly to have been imagined by noble Lords who have spoken so far. There are 700,000 Senior Railcards in operation. There are 700,000 Young Persons' Railcards; 250,000 Family Railcards; 740,000 London Travelcards; 600,000 NetWork Cards and 55,000 gold partners' cards, whatever they are. That adds up to 2.3 million travel cards in operation at the moment. Even from a party political point of view, I should have thought that a government trying to save their future, as this Government certainly are at the moment, would not wish to deny 2.3 million people and their families by putting all that at risk.
1501 We know that before the Newbury by-election the Secretary of State was forced, reluctantly, by Conservative Back Benchers in the other place, to announce that he would take some steps to protect the rail card system. What he announced goes no way towards protecting those 2.3 million people who now have the cards. The concessions he made, although welcome, are inadequate. Let us imagine all 20 different companies trying to make money out of the railway system, as the noble Earl, Lord Glasgow, has just said. How can they be forced to operate all the interchangeable fare arrangements and all the national travel card systems? There must be legislation if we are to achieve that safeguard. I know that the argument is that they will want to continue them because it will be in the financial interest of their companies to do so. That may happen for the first month or year of the scheme, but we are dealing with a scheme which will continue, if the Government have their way, well into the future.
It is our duty, through the Bill, to protect such schemes for 10, 20, 30 or more years. That can only be done by putting the safeguard into statute. There must be some statutory protection for those concessionary fares.
No doubt other noble Lords have received a copy of the letter that I received today from the Railway Industry Association which asks questions about investment. I can do no better than to put it on the record. It represents the companies working in the railway industry. It claims that massive job losses are likely to follow if the Bill is enacted. It states:Public investment is reducing rapidly. Much British Rail investment in 1992/93 was spent on works linked to the Channel Tunnel project. Domestic investment, on the existing railway, was estimated at £987 million in 1992/93 and is projected by British Rail to reduce to £543 million in 1993/94 and £636 million in 1994/95".It claims that there is a shortage of public money and that £13 billion needs to be spent within a decade to meet the needs of British Rail. That again is a forceful contribution to our thinking. It also tells us that there are great anxieties about a number of questions. The letter adds:Will the existing centrally-planned investment wither with nothing to replace it? Will the desired private investment actually happen? How long will it take before such private investment materialises and companies have a solid long term order book? Will there be an investment hiatus forcing companies to close some or all their manufacturing capacity?The anxieties about the railway system we are to have are not concentrated solely in the railway industry; they apply in all the supplying industries which fear the worst.
The transport challenge of this country is to take traffic off the roads and on to rail. That requires massive investment. The Bill does not seem to provide for that investment. I do not believe that the private sector, which it is hoped will substitute for the public sector, will be able to do so. In terms of national needs, I believe the Bill will be totally irrelevant.
§ 8.4 p.m.
§ Lord Teviot
My Lords, although this challenging and interesting Bill is about the way the railways are organised and funded, and proposes very important 1502 changes which we shall have to consider carefully in Committee, it is essential to look at the impact upon the passenger. As most passengers on the current British Rail services travel on the less profitable regional railways and Network SouthEast services, we must not ignore the effects on those services. It is no exaggeration to say that they are the lifeblood of our cities—London and elsewhere—and of many rural communities, as we well know when we are without services due to disputes and bad weather, such as the great storm of 1987.
Many of the local services provided by regional railways are run in partnership with the passenger transport authorities and executives in the seven largest conurbations outside London; namely, Greater Manchester, Merseyside, Tyne and Wear, West Yorkshire, South Yorkshire, West Midlands and Strathclyde. On those services, the PTA and PTE decide what trains will be run, what the frequency will be and how much the fares will be. They also have a major role to play in decisions on investment in the future of the networks in their areas. That partnership has resulted in investment of over £600 million in rail services over the past 15 years.
On the ground, the fruits of that work can be seen. For example, to name but a few of the many vital improvements to the rail services in the cities, there are the underground electric services in Merseyside; Manchester's new airport rail link; the new stations and interchanges in South Yorkshire; the Tyne and Wear Metro; the cross-city electrification in Birmingham; and the Bradford, Ilkley and Skipton electrification in West Yorkshire; and, last but not least, the Ayr electrification in Strathclyde, where passenger levels have increased by 60 per cent. I was delighted to hear my noble friend Lord Lindsay say that there might be another PTE in the Lothian region. That is something that should be considered.
I have long been a supporter of the concept of the PTAs and PTEs and an admirer of their achievements; and I welcome the fact that the Bill recognises their role and proposes to retain it under the new arrangements. Here I must declare a personal interest as a consultant.
However, there are still some concerns about how the partnership will work in practice under the Bill. A number of undertakings have been given in another place by Ministers; but the Bill has not been amended to meet them. Those issues include the role which PTAs and PTEs will play in the franchising process. The future of their ability to offer reduced rate concessionary fares to children and the elderly on all railway services in their areas regardless of whether they are franchised or not. The way in which disputes between the franchising director and the PTA/PTE, which we trust will not arise often, will be dealt with. The future protection of investments which have been funded by the PTAs and PTEs, including many of the schemes that I have already mentioned. And the future cost of local rail services and how any increases caused by the Bill would be funded.
I hope that my noble friend the Minister will be able to give me some positive response on the subject of 1503 government amendments in Committee to deal with those issues. If he cannot, I would need to give very serious consideration to tabling amendments myself.
I also have an interest in the effects of the Bill on the men and women who work for British Railways, a point dealt with by the noble Lord, Lord Howell, and who must be understandably very concerned about many aspects of their future careers. They will be keeping the services running in the period up to the time they are franchised. The process of creating the franchises and transferring staff to them will create many difficulties and I hope that the Government will consider carefully how they can ensure that services are provided effectively in the transitional period.
Following on from that, I have two worries about the ability of the franchise operator to survive—something which may well deter established entrepreneurs from submitting bids. The first relates to open access. At any time after a franchise is let, and the franchisee agrees a price or subsidy with the franchise director, some other operator—I was going to say "predator" but to be kind I shall say "operator"—could run trains at prime times and on popular routes which must affect the franchisee's income plan. What can he do to balance his costs?
Secondly, if the economy turns downwards after the letting of a franchise, it is not clear to me at the moment what financial levers the franchisee can pull to keep in business. Railtrack is unlikely to reduce its access charge, and the franchise director will not have the money to help him. Will he be allowed to reduce the service; or, sadly, if it becomes insolvent, will the railway cease to run? Obviously, we want the most competent managers to run our railways in the future. I hope that this will not deter them from coming in to operate them.
Finally, I wish to draw your Lordships' attention to the fact that the Bill makes little mention of the fact that major investment, especially in infrastructure, will be necessary to keep the railways in operation for years to come. I hope that during our consideration of the Bill my noble friend the Minister will be able to assure us that investments will continue to take place at an adequate level, and that the complicated organisations which the Bill creates will not serve to stifle investment.
§ 8.11 p.m.
§ Lord Broadbridge
My Lords, I speak in this Second Reading debate simply to make a number of random but heartfelt points. I am not a great railway specialist, as are others who have spoken; nor am I a pedestrian like the noble Lord, Lord Mountevans. Indeed, I walk, cycle, drive and catch trains. Occasionally I am airborne. But while agreeing with much that the specialists have said, I respectfully bear in mind on their behalf the old warning that the prophet is never received in his own country.
The railways' future must be seen in a very broad context embracing pollution and the environment, safety, flexibility and availability, cost to the traveller and the whole industry which supports it. That brings me to my first point.
1504 As we have heard from the noble Lords, Lord Howell and Lord Teviot, the Railway Industry Association is arguably, and I believe convincingly, desperately worried about the demand for all the material and services that it supplies. It has 60 member companies employing nearly 30,000 staff in all parts of Britain. Very strategically, the railway supply industry is one of the few British industry groups which still has a majority market share of UK sales. It exists to supply Britain's railways with trains, track, signalling, power lines and everything from ticket machines to telecommunications, and to export British-made equipment extensively overseas. Unless supported in some way, it must surely be some time before the franchisees of a newly-privatised railway system build up the kind of level of capital required to be able to purchase railway stock and services at the present level of investment, let alone at the much higher level actually required and for which privatisation is recommended in the Bill in the first place.
Is there not, therefore, a grave danger of an investment hiatus? This would be disastrous for the member companies of the Railway Industry Association. It stated unequivocally in oral evidence given to the recent Transport Select Committee in another place that the present Bill's proposals, if carried through unamended, could annihilate the industry with an estimated 15,000 jobs lost due to lack of orders and the uncertainty created by the Bill. Indeed, 1,500 jobs have been lost already this year as a direct consequence of the absence of new orders.
Railway supply, both at home and in fiercely competitive overseas markets, is something we do extremely well. It would be a tragedy if the UK suppliers' position were to be undermined. A solid, long-term order book is the only route to survival and I do not see that happening in the mid-1990s. The Select Committee published its report on 27th April, only seven weeks ago. In its recommendations it calls:upon the Government to address as a matter of extreme urgency the problem of the hiatus in railway investment in order, first, to arrest the decline in the quality of the railway system and, secondly, to ensure that sufficient manufacturing capacity survives into the late 1990s to service Railtrack and the operating companies when they find themselves in a position to place orders".Secondly, I am deeply worried also for the future of timetabling. By analogy with the privatised bus companies, in Sheffield, which I know well, it used to be possible before deregulation to buy a timetable for the whole city which lasted for a year. Now times are subject to change on an almost weekly basis. An infrequent but dependent user—say, a disabled person travelling to hospital for an outpatient appointment —can be left in the pouring rain, an icy gale or both because the bus is 45 minutes later than last time; or, even worse, earlier so that it has already gone.
Unlike many overseas countries, Britain has rejoiced in the ability to plan a rail journey given, first, by Bradshaw and now by the ABC backed up by an excellent main line station inquiry service. But if privatised operators keep changing the times, as they do with the Sheffield buses—and as we were assured they would not be allowed to—chaos and discomfort will result. Timetable inquiries merely give the*** 1505 engaged signal as a result of attempted questioning by anxious travellers. And that is provided that they can find the correct number to ring. There must be a national published timetable available to passengers and covering all services, as we have heard. Good connections and facilities for the disabled, luggage and bicycles should also be guaranteed in any new regime.
Thirdly, and allied to this, is the absolute desirability that through-ticketing should continue, together with centralised seat reservations. We must retain our system-wide information services and train inquiry points if passengers are not to suffer confusion and annoyance.
Fourthly, apportioning compensation liability when, in the broadest terms, things go wrong will present tremendous problems and require huge administrative effort. The difficulty of transferring current legal obligations, of which there are thousands, to a new franchised and Railtrack system have been said to be almost insuperable, and there is a danger that claims will be met by buck-passing between the operators, Railtrack and others. It takes long enough to get satisfaction out of the present British Rail— and it is the only other party involved.
Fifthly, I am worried that safety on the railways will be a great deal less secure than at present. There will be many fingers in the pie; for example, private operators with little or no experience in railway safety procedures, Railtrack, the regulator, the franchise director, residual British Rail and the Health and Safety Executive just for a start.
In conclusion, I give my tentative support to the Bill if only because I cannot think of a better way of handling the future of our railways. Almost everyone agrees that the key requirement in improving our railway system is greater investment in infrastructure and rolling stock. The state cannot provide this, it being generally agreed that public sector borrowing must be reduced at all costs. No doubt the emotional and industrial Luddites will ask, "Why can't we just leave things as they are and just sail along as before?". That is not an option; there is no money. Therefore, a radical solution is required.
The Bill can be a force for good, creating a new era of innovation and investment. It can also be a force for fragmentation and haphazard investment, endangering passengers and, in particular, as already mentioned, the supply industry. As yet the evidence points down the second route; the markets have so far been unimpressed by railway privatisation. The recent track record— not wishing to pun— is not encouraging. There has been no agreement yet on a £400 million contribution towards the £1.8 billion Jubilee Line extension, which gained Royal Assent more than a year ago.
The Bill, by analogy with the game of golf, is stacked full of bunkers into which the passenger, who must be paramount, can be driven. I hope that by constructive and radical amendment passengers can be offered fairways rather than bunkers. In this hope, and in the hope that the Government will be forewarned by all that is said today, I wish the Bill a Second Reading.
§ 8.20 p.m.
§ Lord Auckland
My Lords, the great Austrian composer, Anton Bruckner, wrote a number of symphonies. Many of them were very beautiful and most were extremely long. I should not describe the Bill as beautiful but with 140 clauses and 13 schedules, it is long and confusing.
Not surprisingly, I am in favour of competition whether it is in connection with the railways, water resources or anything else. But this Bill strikes me as being neither one thing nor the other. It is not out and out privatisation— I use that awful word— but a franchising measure. That word has cropped up in the English language and it is rather confusing to understand for someone like myself who is not connected with the railways.
I am something of a railway buff. As a child I used to travel in the school holidays to the Highlands of Scotland. When I travel to Scotland by rail now it is almost always on business by InterCity to Glasgow and Edinburgh. I travel rarely, but when I do I find that it is an extremely good service. It is much better than flying because at Heathrow and Gatwick one must walk for miles. If one travels by rail, one goes from the centre of London to the centre of Glasgow in about four-and-a-half hours.
Since 1954 I have commuted from Surrey to London every working day. One has seen all kinds of problems; for example, strikes, go-slows, and the absence of guards. I wonder whether the Bill will counteract any of those problems. Oh that it would! It seems to me that at a time of international recession the Bill will be extremely difficult to operate. Where is the money to come from for the franchising? A number of companies have been mentioned but they are in difficulties. Therefore, I find it difficult to understand where the money is to come from. I have discussed that with a number of top people whom I know in the business world. They know a lot more about such matters than I do and they all make the same point. There is never a right time to put an enormous project like this into action but 20 years ago it might have been possible. It is rather like the closing or diminution of London hospitals. Of course the hospitals in Surrey, Essex, Sussex and so on need funds and people prefer to be treated in those hospitals, but there is a shortage of money. That is not confined to this country.
The Bill has been improved considerably. On Third Reading in the other place concessionary fares were guaranteed, as has been made clear. However, I am rather suspicious about that. Let us suppose that a franchise line gets into difficulties. What will happen in that event about concessionary fares? As I understand it, concessionary fares are something of a favour granted by British Rail and there is no mandatory obligation on it to grant them. However, under the present set-up it is unlikely that such concessions would be terminated. Under a franchising system if there are financial problems, one wonders what will be the outcome. As far as I can see, there is nothing in the Bill which guarantees those matters, particularly under Clause 5 which deals with that subject.
1507 I turn now to the question of security. Many rural stations are unmanned. There is no power in the Bill to ensure that the franchisers will provide some kind of security at those stations. Of course British Rail can be criticised substantially in many ways, but if this draconian measure is to go through it is essential that stations should be manned for the sake of safety, particularly at large stations. There are a number of stations in the home counties which, after 10 o'clock at night, have no staff present. If such a measure is to go through, action must be taken to deal with those problems.
This is a rather piecemeal Bill. I accept that the intentions may be good. One knows that British Rail is a monopoly. I was in the Army in 1947 so I do not recall the Bill going through and I have not read the details. However, I was in your Lordships' House at the time of the Beeching Report. If that plan had gone through in its original terms all stations north of Glasgow and Edinburgh could have been closed.
What kind of powers are the franchisees to have? I know that the transport users councils are to be given powers under the Bill, but will those powers be as comprehensive as they are at present? As I understand it, at present if a railway line is to be closed a public inquiry must be held. Will that procedure continue to apply under the Bill?
There are many questions to be answered. Second Reading is a general debate and the Minister must answer a whole series of questions. If all the questions were to be answered, the House would sit as late as it did last night— into the early hours of the morning. However, the Bill must be examined thoroughly in Committee. It is a far-reaching Bill. It may be that it is more favourable than many of us believe it to be. It can be improved in Committee and your Lordships' House has a mandatory task to do just that.
§ 8.29 p.m.
§ Lord Greene of Harrow Weald
My Lords, I listened with interest to all the speeches that have been made in connection with the Bill. As somebody else has said elsewhere, this happens to be one of the industries which is held in some affection by the general public. Why that should apply to the railway industry one does not know. It does not appear to be the case in respect of other industries. Some speakers have spoken of their connections with the railway industry and have revealed what they did and where they come from. I should just like to say that I worked for a railway company for 20 years. After that, I worked for the railwaymen's union for 30 years. Therefore, I have some kind of connection with the industry.
I have been reading the proposals in the White Paper,New Opportunities for the Railways. I read with interest an extract which says:British Rail has made significant improvements in recent years. Its efficiency compares well with other European railways. The productivity of the BR workforce is among the highest of any European railway. InterCity services and BR freight operate without direct subsidy".1508 When one reads that, one wonders why we have the Bill. I have not been able to go through all of it, but I wonder whether in fact it will solve the problems so far as concerns the railway industry.
The Bill talks about franchising certain sections of the industry. In such enfranchisement, I wonder whether people think that they will be running the trains just as they like; that is, where they like and at any particular time. That is not a possibility. There happens to be a person in the railway industry about whom one does not hear much these days. One hears about the chairman, and others, but that person happens to be the operating manager. He is the man who is responsible in all cases for getting trains in the right position, and for ensuring that the timetables are worked out.
No one, whether or not they gain a franchise, will be able to do just what he wants. I do not know whether such people will have operating managers concerned with the running of individual railways. However, if one goes back to 1924 when the amalgamation of all the railways into the four main lines took place, 104 railways were amalgamated at that time. They did not all have operating purposes; indeed, some of them were just sections of railways. As regards those operating railways, I am wondering whether, when we get to the point of franchising, there will be as many franchises given out to match the 104 railways that originally existed. Further, how will they operate?
In effect, the Bill has been put forward with the idea of trying to make the railways pay. We have already heard what the noble Lord, Lord Marsh, said on that aspect. The idea is also to bring in the influence of private industry, commerce and all the experience that is attached to it.
When British Railways was formed in 1948 the first chairman was Lord Hurcomb. He was chairman of the British Transport Commission in those days. But later, as noble Lords know, it was dissolved. He was followed by Sir Brian Robinson (later to become Lord Robinson). He, in turn, was followed by Lord Beecham who was followed by Sir Stanley Raymond. There then followed Sir Henry Johnson, the noble Lord, Lord Marsh, Sir Peter Parker, Sir Robert Reid and Sir Bob Reid. Of those nine people who were appointed as chairman of British Rail, only two were career railwaymen. I am not saying that they should only be career railwaymen working within the industry, but those people were brought into the industry because of their commercial and economic knowledge of the world outside to try to make British Rail pay on the same basis as someone is now trying to introduce under the provisions of the new Bill. But they all ended up the same way. With no disrespect to any of them, the fact remains that they all finished up with no money.
Consequently, there is no guarantee that when the Bill begins to work— that is, if it does get working; and many people have expressed some doubt about that — it will improve the financial position and relieve someone of their debts. I do not think that that is a possibility as regards the present Bill. However, it is interesting to note that in the time that those nine 1509 gentlemen were in charge of British Rail they did carry out a modernisation programme, with the transfer from steam to diesel and electrification. Therefore some improvements were made. However, as someone said, nowhere near the equivalent amount of money that was put into British Rail was put in by the other 11 countries of the Common Market.
I listened with interest to what the Minister said about the question of staff conditions. I do not wish to give the impression that there is likely to be difficulty in this respect, but there is a certain amount of anxiety among the staff, as has already been pointed out by other speakers, about being transferred from one industry to employers in another firm. I accept what the Minister says in the sense that there has already been some understanding with reference to pensions and superannuation. I do not know exactly what he said about the superannuation and the pension funds. I am assuming that that matter rests with the committees and the trustees. I hope that that is so, because when it comes to talking to committees, trustees and unions, at present the Government are not very forthcoming. Instead of easing the situation over negotiations, they seem to be more concerned with making life more difficult. I am not in that position now; indeed, I have been away from the situation for some time. When such matters are sorted • out with the staff, I hope that there will be a clear understanding and agreement that there will be no loss involved.
Other Bills have been passed in this place. I can remember the enabling Bill which stated, at the end of the Explanatory Memorandum, that the Bill would not affect the conditions of the staff concerned at that time. However, the present Bill may well do so. Consequently, I want to express the hope that, when negotiations take place with the unions on the superannuation funds, there will be real agreement. By that I mean both sides agreeing: not one side saying, "That is what you are going to have and you can't do anything about it". That will do no good. There will be enough difficulty with the operation of the Bill without upsetting the staff still further.
I assume that the Bill will be carried, but listening to the debate today I believe that the present position is three to one against it being carried. However, I do not know whether that will be the position later. I am not at all enthusiastic about the Bill. I hope that the Minister will pay attention to the problems I have mentioned.
§ 8.40 p.m.
§ Lord Braybrooke
My Lords, the station is just coming into view and we are near the end of the line. I hope that we are not near the end of the line in more senses than one. I am a supporter of competition on the railways, and I am a supporter of financing them. I am also basically a supporter of this Bill. However, it is a potential minefield for the Government. The operation we are discussing is a highly complicated one and in my view this privatisation is not the same as other privatisations. I agree with the comments made by the noble Lord, Lord Marsh, in that regard. This privatisation is far more complicated. Much care 1510 and thought will be required on many of the aspects and details of managing and running the railways in this country in the future.
The Government, for better or for worse, have decided on franchising and a separation of track, signalling, fixtures and fittings rather than what is now known as a vertically integrated railway. I fear we must consider this one option. There are of course other options. Some weeks ago I read a fine letter in the Telegraph. The author of the letter suggested that East Anglia, both from a geographical and a rail point of view, would be an ideal place to conduct a trial run of the new system. He suggested that East Anglia could be separated and that a railway system covering the whole of East Anglia could be operated from Liverpool Street and from Fenchurch Street. He believed that this operation, run separately, could be quite satisfactory.
As any railway supporter will agree, there is a significant railway culture in this country. Farmers talk about farming being a way of life and railwaymen regard railways as a way of life. That is hardly surprising as the railways are the oldest form of mechanical transport in the world. Railwaymen are rightly proud of the railways. Railwaymen have many rather curious and technical rule books which support the railway culture. Some of those rule books may now be regarded as rather old fashioned; but on the whole most of the rules make good sense. Nevertheless, they obviously need bringing up to date.
In my view the railways need improving and need money. We also need to save our railway heritage and build more railways. Beeching axed many lines—in fact, one-third of the network. Although some of those lines probably were ripe for axing 30 years ago, many of them would now be an absolute godsend. The Oxford to Cambridge line is one example. Having arrived at Bletchley one could then travel on to anywhere in the country. In East Anglia many towns are now without a railway which would be invaluable for commuters and would reduce road traffic. Dunmow, Halstead and Long Melford immediately come to mind in that respect. However, we cannot cry over spilt milk; but we can give consideration to reopening railways which would be viable where that would be practically possible.
Railways need a high level of investment both in terms of capital and labour. The assets of the business are expensive and long lived. Rolling stock, for instance, requires replacing after about 25 to 35 years; and some stations were built 150 years ago. As the noble Lord, Lord Marsh, said, no other form of transport has to support sea walls, bridges, viaducts, tunnels and the like. However, despite a reduction in the network of about one-third post-Beeching, passenger miles travelled in 1992 were slightly up on those of 1962.
The key issues in this Bill which may be worth considering are costs and benefits; the future level of subsidies; and the prospects for new investment and expansion. A great deal hangs on the framework and control of Railtrack and that company's efficient and cost-effective operation. Many noble Lords have said that the track accounts for 50 per cent. of the running 1511 costs of a railway. That is a large percentage. I should not like to run a railway with someone else owning my track.
I believe that track maintenance under Railtrack will be kept to a similar standard throughout the country. This applies also to signalling. If the track was not kept to a similar standard, one franchisee could object that another franchisee had better track. These matters all need to be carefully watched. Without wishing to be offensive in any way to any Members of your Lordships' House who are lawyers, I would suggest that lawyers make a lot of money out of litigation and squabbles. Bureaucracy and lawyers' fees in this highly complicated set up of Railtrack, regulators and other bodies may well eat up a lot of the money which should more correctly be used in running the railway. That is apart from the aggravation that could arise.
Areas of friction and bureaucracy between operators and Railtrack must be avoided at all costs. There may be a view that Railtrack should permanently own the track and the signalling rather like the state owns the motorways. However, I gather that it is envisaged under the Bill that Railtrack should gradually be privatised. Railtrack's competence and charging rates will largely determine the success or failure of running many rail services. Having said that, I suggest the Government's ideas could work if put into operation with great care and with good sense. The chief merit in my view is that if the scheme is a case of "gently, gently, catch a monkey" as it unfolds, no doubt changes will be made as experience is gained. However, we must be absolutely certain that while the changes are taking place the railway network runs at least as well as it does at the moment, otherwise the effect on the Government and on the whole country could be pretty disastrous.
Many safeguards and existing privileges will have to be maintained. These have already been mentioned by many noble Lords. Noble Lords have mentioned Network cards and other such matters. We have received reasonable assurances from my noble friend the Minister that pensions will be safeguarded. I have received a letter from the chairman of the Southend-on-Sea branch of the British federation of pensioners. He expresses great concern at this measure. The letter is highly complicated and I have passed it to a good friend to study.
As regards running many different railways on different lines, that should be no problem. As the noble Lord, Lord Greene, said, in 1922 there were 104 companies or slightly more. Running powers in those days applied throughout the land. It was a daily and necessary occurrence for trains to run thousands of miles on other companies' land. Charging was calculated on a mileage basis. For example, the Great Northern Railway's line ran out before York but the company always pulled trains to York where the North-Eastern Railway took over. There was cross-ticketing. That was simple. We must remember that those were the days when people could do mental 1512 arithmetic, and before the days of computers. The railway clearing houses did it all and there was no problem.
Whether or not they are privatised and franchised, the railways must be supported by subsidy, open to public and private finance, improved and extended. We need more and improved railways to serve the people and the trade and industry of this country and to avoid the waste of land resulting from excessive road construction and pollution. The road network will also have to be extended; but I reiterate a point which I made on 18th March. To move a 5,000 tonne train of gravel uses one 4,500 horsepower diesel locomotive; to move that same load by road needs 144 38-tonne lorries with a total horsepower requirement of 51,840. Noble Lords know as well as I do which is the more environmentally friendly way of moving gravel.
The noble Lord, Lord Broadbridge, mentioned railway towns such as York. Such towns may suffer and people who work there in the railway industry must be safeguarded, as must people who work in the many other factories throughout the country which build rolling stock.
In ending I declare my interest. I started driving steam locomotives at the age of seven in 1939 when I was evacuated. Fifty four years later I have not stopped doing so and do not intend to. I run a railway, and I should like to ask my noble friend the Minister whether there will be a block exemption for all private railways from licensing by the regulator. If private railways had to be licensed, it would drive us up the wall.
§ 8.51 p.m.
My Lords, I support the general principle of privatising the railways. When the railways were nationalised in 1948 the position was very different from the present situation. The railways were used and abused throughout the war, presumably with the minimum maintenance acceptable. The road system and the vehicles which ran on it were primitive by today's standards. Furthermore, car ownership was at a fraction of today's level and only the relatively affluent could afford to own a car. Internal air travel was insignificant. Thus, at that time the railways were to a greater extent monopoly suppliers of long distance travel and carriers of freight and parcels. However, even before the war, cars, coaches and lorries were providing fierce competition. There was also a considerable amount of road haulage between cities.
History is repeating itself. The railways caused the decline of the inland waterway transport system and now road traffic is doing the same to the railways. No doubt when the railways were developing there was opposition from those in favour of the canals. It is pointless to resist technological improvements from road transport.
The difficulty I have with this and previous privatisation measures is this: the Government insert competition where it is not needed and fail to introduce it where it is needed. When the Government privatised the electricity industry they failed to 1513 consider the problem from the standpoint of an energy industry. As a result we ended up with British Coal having only two significant buyers in the electricity industry. That is hardly a competitive market in the supply and purchase of coal. The Government were then faced with the problem of the coal industry, which we know all about. It is difficult to imagine a more homogeneous product than electricity. It is easy to transport and market. We could have had vertical integration in that part of the energy industry— several packets consisting of one or more power stations with their associated collieries. As now, the national grid would still be necessary. I suggest that that would be a far more competitive market.
Whenever one talks to someone in the railway industry they always explain, or complain about, the track cost problems. Delays on our railways are usually due to track, signals or other infrastructure problems. Some 46 per cent. of employees on InterCity's East coast line are involved in infrastructure work. However, the Government's plan is to separate the infrastructure from the operational side. The Secretary of State said in another place:As an organisation, BR combines the classic shortcomings of the traditional nationalised industry. It is an entrenched monopoly. That means too little responsiveness to customer's needs, whether passenger or freight; no real competition; and too little diversity and innovation. Inevitably, it also has the culture of a nationalised industry: a heavily bureaucratic structure; an insufficiently sharp awareness on the part of employees that their success depends upon satisfying the customer … Inevitably public ownership also brings with it the constraints of public finance, not least given the many competing demands on the public purse"— [Official Report, Commons; col. 2/2/93; col. 154.]I agree wholeheartedly with what he said. I have experienced that both as a customer and also when operating as a supplier to BR operations.
If privatisation is so good, why is it not applied to the infrastructure? No doubt the Minister will reply that it is necessary to have several operators on the same line in order to have competition. But there is already plenty of competition from coaches, buses, private cars, lorries and aeroplanes. In fact, that was partly responsible for the decline of the railways in the first place.
Passenger transport is most sensitive to delay. Therefore, a vertically integrated passenger operator will do everything possible to eliminate any source of delay. The leading passenger operator on much of the track on which it runs is InterCity. That organisation is responsible for much of its own infrastructure and is one of the few railways to break even. That arrangement should continue.
I agree with much of the optimism of the noble Lord, Lord Mountevans, regarding the railway industry. He also spoke about Railtrack's position in the public sector. There is a possibility that Railtrack could contract out signalling, for example, with defined levels of reliability and safety and with severe penalties for any delays to the operator. However, we cannot escape the requirement for investment. Private industry and finance could provide investment, but would have to charge Railtrack, which would have to 1514 pass that cost on to the rail operator. Thus, fares, subsidy or both would have to rise to pay for that investment.
I should now like to address the situation regarding Network SouthEast. The turnover of Network SouthEast was £1,044 million in 1991–92, but it lost £182 million. That loss is made up by the government subsidy or grant. That situation has continued for a number of years. Network SouthEast is largely a commuter market. It is a very price elastic market. Travelling from, say, Brighton to London by car is not an attractive proposition. The price of rail travel has not been increased because it is felt that the level of service cannot justify it. However, that must have an effect on the housing market. If commuters pay less for their travel they will be able to pay more for their housing. That may be one reason why the price of housing in the South East is greater than in the rest of the country. In other words, we are not just subsidising Network SouthEast we are also inflating house prices in the South East.
Many speakers have talked of the need to move passengers from road to rail. However, many services are subject to peak period capacity restrictions. It would be difficult to reduce overcrowding in trains at those times.
The noble Lord, Lord Redesdale, referred to the cost of tickets. InterCity charges are related to the marginal cost of using a private car. The trouble is that for a rail passenger the marginal cost is 100 per cent. of the ticket price whereas car drivers often think that the marginal cost is the cost of the petrol only. They ignore the depreciation and the cost of the tyres. The Government are addressing that problem by considering road pricing on motorways; and we look forward to the results of that.
On Network SouthEast a standard day return from Brighton to Victoria is £22 for a 50 mile journey and only £11 for off-peak periods. Thus the cost per mile is 22p in peak periods. But I believe that there would be some difficulty in driving from Brighton to Victoria at rush hour in 66 minutes and at that cost per mile.
Many noble Lords have referred to moving freight from roads onto rail and they blame the Government for not achieving that. But why, despite Government grants, does freight by rail appear uneconomic? The lorry can carry 25 tonnes but the train carries 2,000 or more tonnes. The lorry pays about £3,000 in road fund tax. If a train operator were to pay tax pro rata on carrying capacity he would have to pay £240,000.
Apparently road haulage is being used to move tube trains to Rosyth and back for refurbishment. Why is it more economic to move trains by road and not rail? Could it possibly be that road haulage equipment is now so highly developed that rail haulage is inherently uneconomic except for bulk heavy freight? Even that is questionable because there are reports of more coal for power stations being moved by road.
Many noble Lords have quite properly given attention to employee considerations. While the railways are in the public sector, not only will the Government attempt to keep fare increases down but they will also force wages down. The advantage of 1515 being in the private sector is that it is possible to have a policy of paying relatively high wages for high quality staff. The converse concerns peanuts and monkeys.
The last point that I wish to draw to your Lordships' attention is this. InterCity currently breaks even. Vertically integrated and in the private sector it could make a profit. I have already referred to Network SouthEast. Most noble Lords who have spoken have considered Network SouthEast or InterCity main lines. It should not be forgotten that Regional Railways fare income is about £313 million whereas its subsidy, on top of its fare income, is £584 million. That is a considerable subsidy. Clearly Regional Railways is obliged to run services under the public service obligation and for and on behalf of the PTEs. It may be that in that area a publicly funded Railtrack type of organisation may be appropriate. The operator franchised could recover his costs and profits from his passengers. On some profitable routes he may have to pay for access; on others he may have financially free access to the network on the same basis as a coach operator on the motorway network.
The point is that the economics of Regional Railways are completely different from InterCity and Network SouthEast. That is not to say, however, that Regional Railways should not be integral with the national timetable.
I look forward to the many hours of debate with the Minister during the subsequent stages of the Bill.
§ 9.3 p.m.
§ Lord Lyell
My Lords, first, I thank my noble friend Lord Caithness for taking us on a very clear tour of the provisions of the Bill. One of my noble friends asked how many clauses there were. I believe that there are 134 clauses and 13 schedules, one of which is split. My noble friend missed out nothing. However, we have many hours in Committee when no doubt we shall go through the Bill line by line. I was much entertained by the speech of the noble Lord, Lord Clinton-Davis. I did not agree with all of it. Nevertheless it was entertaining, witty and relevant.
However, I wish to ask the Government what they intend the Bill should achieve. First, do they believe that the provisions of the Bill and all the matters so carefully explained by the Minister will unleash the talents of the personnel who at present work in all aspects of British Rail, InterCity, passenger transport executives or passenger transport authorities? Secondly, during the course of the Bill I hope that we shall envisage how the provisions will reduce costs over the entire network, both locally and for regional railways. Perhaps I may refer to Scotrail which I use. It will be familiar to many noble Lords who have spoken, including the noble Lord, Lord Taylor of Gryfe.
Over the past five or six years we have seen Type 158 rolling stock. Those are two or three carriages with trolley refreshment facilities. That is a completely novel departure. In the far flung areas of Scotland, such as the county of Caithness, one has Sprinters. I have to tell my noble friend that I have not yet visited 1516 that area; I got off the train at Forsinard. The Sprinters go to Wester Ross, Mallaig and to Oban. It is an enormous change since my youth and since the era of romantic carriages and steam locomotives of all kinds, which will be so familiar and which were described so beautifully by the noble Lord, Lord Marsh. Not only were they romantic but they were enormously costly, as they would be today.
I refer your Lordships to one aspect of the Bill. It is the happily named Clause 4. It deals with the powers and duties of the regulator. The Government, the Minister and his right honourable friend the Secretary of State may well believe that in instituting the regulator for railways in the United Kingdom they may unleash the talent of a tough and powerful regulator. The regulator of Ofgas has the happy coincidence of being a Scot and a chartered accountant. However, the thought of the regulator of Ofgas carrying his talents into some aspects of British Rail fills me with some amusement.
Perhaps my noble friend would also look at Clause 4(1) (a) (on page 3) and subsection (5) (on page 5) dealing with through ticketing. To me and to many noble Lords who may be laymen, it is difficult enough to read the timetable, let alone the fares which consist of savers, supersavers and, perhaps in a few years' time for me, the senior citizens' rail card, never mind all the other bonuses.
I enjoyed the speech of my noble friend Lord Boyd-Carpenter, who referred to Paddington. However, I do not necessarily agree with him. I went to Plymouth on Bank Holiday Friday when there were any number of extra trains and I was more than impressed at the ease and speed with which staff of InterCity at Paddington managed to get me as well as thousands of passengers on to our trains at the same time as massive reconstruction was going on there.
As regards fares and the complications of finding the cheapest fare, or which fare is the best value, we do not only have those problems in our own country. I understand that in France for larger families—familles nombreuses— the larger the family you have, the greater the reduction. In Switzerland I discovered something called the Sportausflug. I went to the ticket office and asked to go to a certain station but they said: "What are you doing in a smart suit? If you put on sporting kit, we can give you a sport ticket". So off I trotted and put on my shorts and jersey and obtained 30 per cent. off. I should like to see some Members of the Front Bench doing that quick change! However, it shows that there are complications elsewhere.
In the course of the next few weeks we shall watch my noble friend and his team in the discussions on fares and tickets. The noble Lord, Lord Clinton-Davis, referred to the high speed train systems abroad. Both the TGV in France and the ICE in Germany — express systems— have much to teach us in the operational aspect. We see the TGVs hurtling through France in the sparsely populated, rather flat areas on purpose-built tracks. That is what they like to show us, but perhaps the noble Lord, Lord Clinton-Davis, and my noble friend will be able to advise me on the progress of the TGV system to Nice. So far as I am aware, it goes as fast as was intended to Marseilles but 1517 has to go the rest of the way to Nice along the conventional track at conventional speeds because the French too have problems with building purpose-built tracks through densely populated areas, just as we do in Kent.
The one issue in our discussions on the Bill will be value for money, and how the financial aspects of the many clauses which have been explained by my noble friend will give value for money to the passenger and the freight transporter. No doubt we shall come to that.
TGVs have been referred to and we have a great deal of luck in this country with the Great Northern line from King's Cross, which has been mentioned by some noble Lords. It goes as far as York and on to Darlington. The line was built in the 1860s, 1870s and 1880s but trains can still go at 225 kilometres an hour or more along it. Thanks to the foresight of builders of that line, there is already great competition with the trains between London and Glasgow. The East Coast main line goes to Edinburgh and the train goes on extremely quickly to Glasgow. I see the noble Lord, Lord Carmichael, is showing dissent. But with similar performance, luck, the financial and political commitment as well as the will on the part of my right honourable friend the Secretary of State, and support for the track franchisee from the same area, we shall have competition between London and Edinburgh within the next five to six years, once the West Coast main line is upgraded.
Lastly, I should like your Lordships to look at one country which is not unfamiliar to many noble Lords, particularly my noble friends Lord Brabazon and the Minister. I refer to Switzerland. With its geography, it has many of the problems we have in Scotland of mountains and land tenure. It is extremely difficult for the Swiss railways, let alone the roads, to be built through areas of land, thanks to the problems of land tenure in the cantons and communities. Secondly, the Swiss have through-ticketing. Tickets not only cover the federal and private railways on standard gauge, but also with one ticket people can go on private mountain railways, on buses and on cable railways. That can easily be done, as noble Lords know.
What is most important in Switzerland is the political will of the government who have considerable drive and commitment. Their project will not be unfamiliar to the Minister, it is the Neue Alpine Transit (NEAT). It is a plan to drive two new tunnels under the Alps to take freight on a piggyback system north of the Alps, from the northern cantons down to Ticino and on to Italy. Five years ago, the cost started at 15 billion Swiss francs and the last time I heard it was 20 billion Swiss francs. Nevertheless, the project is being carried through with considerable commitment and will. What President Ogi can do I am quite sure that my noble friend and his right honourable friend can do.
In conclusion, I am very grateful to my noble friend for taking us so clearly through the provisions of the Bill. I hope that he and his honourable friend will identify and help with the costs of maintaining rural 1518 lines. I am sure that they hope to achieve savings with the Bill and that improvements will result from our discussions.
Lastly, I applaud the intention of the Government to save the taxpayers' money so far as possible and facilitate private investment where appropriate in order to improve the rail network and, above all, encourage the personnel and people who work in this great industry. I look forward to hearing what my noble friend has to say tonight and in the weeks to come. I thank him for his help.
§ 9.14 p.m.
§ Lord Tordoff
My Lords, I was struck by one remark made earlier in the day by the noble Lord, Lord Clinton-Davis, when he said that we had woken up very late. At that stage I had the feeling and still have that we had woken up very early, particularly those noble Lords who were here until ten minutes past three this morning.
The Bill has had a thorough going-over today. It has not had a lot of support. The noble Lord, Lord Boyd-Carpenter, spoke up bravely but I had the impression that his remarks had already been covered in an astonishing— indeed, quite dramatic— speech by the noble Lord, Lord Marsh. It seemed to me that with his speech the noble Lord had achieved game, set and match.
There has to a degree been a certain amount of support. One or two noble Lords, like the noble Earl, Lord Lindsay, seemed to be in favour of the measure in theory but against it in practice. There were a couple of speeches along those lines. The noble Earl's paean of praise for Scotrail and what is happening in Strathclyde PTE did not suggest that the Bill was altogether necessary in that part of the world.
We need to ask, as we have done all day, what the Bill is for. Clearly it is not to raise money for the Exchequer because it will not do so. The assets are not being sold off at present and indeed there are not all that many of them. Apart from a considerable amount of land that could be sold, there is not much else that would find a ready market. If one has only a railway and that is all, no one will buy it. There is not much asset stripping to be carried out.
Is the Bill intended to improve the management? Some people have said that the management is rotten. Some people have said that the management is reasonable. Some have said that the management is good. The truth is that in terms of management at the operating level, whatever railway one runs one will not get different people because those are the only people who know how to run a railway. Whether they are retained in British Rail or bought into a franchising operation, the people will be the same. It may be possible to motivate them better and to train them better but if one wants to run a proper railway they will be the same kind of people.
The franchisees will not bring too much new capital into the system because they will not own very much. They will lease their rolling stock and most of their equipment. Railtrack is the only possible inlet for new money from the private sector. But it will not be in the private sector for some time. It seems to me that the 1519 only source of new money in the short term will be the customer and the pay-box. As in many other privatised operations, although the undertakings may be running more efficiently and look bright and glossy, the tendency is for prices to rise, as we found with water, electricity and so on. In this case it will be even worse.
What is the object of the Bill? It has a massive title comprising 20 lines. But there is nothing about the passengers, the public or Parliament having a say about what happens in relation to any objects contained in the title because there are not any objects. However, the Bill empowers the Secretary of State to do many things. Clause 4 states:The Secretary of State and the Regulator shall each have a duty to exercise the functions assigned or transferred to him under or by virtue of this Part in the manner which he considers best calculated"—to achieve certain ends. In other words, the purpose is to do whatever the Secretary of State decides that he wants to do.
I understand that the basic objects of British Rail were set out in the 1962 Transport Act. They impose a duty to provide railway services in Great Britain and such services and facilities as appear to the board to be expedient, having regard to efficiency, economy and safety of operation. I do not see anything similar in this Bill. I presume that that duty will be removed from British Rail although I do not see where that appears in the Bill. Perhaps it is merely going to be allowed to die the death.
The nearest we come to any objectives is in Clause 106, and that only refers to part of the Bill. Clause 106 says:It shall be the principal objective of the Secretary of State… to secure… the result that the function of providing railway services in Great Britain is performed by private sector operators",which is hardly an objective. It is only a partial definition and at Committee stage we really must put some objectives into the Bill. I have no doubt that we will wish to come back to that point at a later stage.
Several noble Lords have asked whether the objective is to reduce bureaucracy. It cannot be, because bureaucracy is increased both within the organisation and externally. It will provide a field day for lawyers. The amount of money which will flow into the coffers of our lawyers will be enormous. Bureaucracy is increased at the expense of local management, local authorities and, indeed, central government.
Is the aim to create competition? Hardly, since the object of the Bill seems to be to create a whole series of small monopolies. Once the franchises have been awarded there will not be any competition in the area — so that stops people trying to run on the same piece of track at the same time.
When we come to finance, as many people have said, Railtrack is in a strange situation in relation to investment. It may be that reduced costs are the Government's answer to all those problems. But the operating costs in the franchising companies can only be reduced, as I see it, by either cutting wages or cutting manpower. If one reduces the wages of the drivers, one will not have a motivated work force. And 1520 I suspect that nobody supposes that manning can be reduced below the levels presently being run by British Rail, where passenger security is becoming a great worry.
If it is the Government's intention to increase funding, then all may be well. However, I doubt that that is the idea. If they can increase funding, why do they not do it for British Rail at the moment? So we return to the end of the equation which indicates that the only way around the problem is to increase fares. Customers need to be assured that they will not bear the brunt of the company's additional costs, which will be high, someone said, if only because of the thousands of pounds of bilateral agreements which the lawyers have put together.
We know that the Government intend to introduce an amendment imposing a duty on the franchise director regarding fares. But one point to which I am sure we will return at Committee stage is that it is necessary for the franchise director, in all circumstances when dealing with fares, to seek the views of the rail users consultative committee. It is not brought in sufficiently for that purpose.
Let me deal briefly with one or two other anxieties. Networking has been much talked about; the experience of bus deregulation shows the problems that occur when deregulation sets in. It did not result in co-ordinated timetables or ticketing, as we were promised. The multiplicity of operators on rail could cause even more problems. The Government have gone some way; they have accepted the principle of through ticketing. We will now seek to probe whether their promises on rail and travel cards are worth the paper on which they are written.
An amendment was promised in another place at col. 763 on 25th May, but when it comes it must leave no room for doubt or for varying interpretation by the operators, which is more likely. Pensions have been mentioned and we will undoubtedly deal with them at considerable length at Committee stage.
In regard to the franchises, one wonders whether the five to seven-year period which seems to be provided is sufficient time to achieve a pay-back on, say, a station development or rolling stock hire. What is going to happen to the Passenger's Charter? If a train is running late from whom do you claim? Do you claim from the franchisee, Railtrack, the regulator or the Government? Do you wait until they have all taken the thing through the courts to decide who is going to pay you for being more than an hour late?
Another point about franchising is that perhaps one worries about business failures. That comment was made to me by someone from the Settle to Carlisle railway. As we know, they fought a great fight to keep that line open. They have successfully kept it open and it is now blossoming as a result of their activities carried out in conjunction with British Rail. However, it might have been bought by a small bus company whose balance sheet was perhaps not all that good. Will they be allowed to have a look at the balance sheet before the franchise is given? Will they be allowed to test those things? That is certainly not clear in the Bill. If the franchise falls in within a short time because the company goes bust, will the line close? 1521 Can we be sure that when the franchises are signed in the first place the commitment to the preservation of services is really there? Apparently the franchise will be based upon only the minimum service. Presumably, offpeak services could disappear altogether. As many people have said— I am sure we will come back to it with considerable force— it is ludicrous that British Rail will not be allowed to tender, even in those situations where the franchise falls in. In my view that is the worst piece of dogma in the whole Bill. It is simply saying, "We do not care how efficient British Rail are. We know that any nationalised industry is bound to be worse than any privatised industry, and therefore BR will not even be allowed to put in a bid, even if it is the best bid in the world, or it is based upon greater knowledge than that possessed by anybody else".
There is a need to write into franchise agreements the preservation of rights of way in those cases where franchises fall in. It may be that for good reasons a service has to be discontinued and the line closed, but it is important that we put into the Bill a right of way along that rail track in case changing circumstances leave the opportunity for it to be reopened in future. We are now beginning to find that PTEs and others are opening up lines and stations on old tracks. In some cases they cannot do it because they have been built over. My view is that a number of those closed tracks should be turned into cycleways or walkways. It may be possible to build upon them, but at the end of the day there must be a definite commitment that those rights of way for railways will be kept open indefinitely.
I am not a bit surprised that the Bill has had a rough ride today. It is extremely complicated. I do not believe that the Bill achieves what it sets out to achieve — even if I am clear what it sets out to do. It is interesting that in the Bill one finds 20 pages that deal with the closure of railway lines and only one brief clause that deals with new lines. If this Bill has any vision of the future it is a vision of decline.
§ 9.29 p.m.
§ Lord Carmichael of Kelvingrove
My Lords, it has been a most interesting if slightly exhausting day. With so many speakers it is amazing how many people have their own particular angle on the Bill. I believe that the figures are still roughly three to one. That includes both sides of the House and perhaps one or two doubtfuls on the other side. Quite a large number had very strong reservations about the Bill.
At the beginning of the debate, following the speech of the noble Earl the Minister, we heard devastating speeches from my noble friend Lord Clinton-Davis, the noble Lord, Lord Rodgers of Quarry Bank, and the noble Lord, Lord Marsh, who had the distinction of being not only the Minister of Transport but also chairman of British Rail. He pointed out quite correctly that the amalgamation of 1923 was essential for the railways if they were to make anything of the system. In fact, the railways have not made a profit since 1923. We tend to forget that the railways' money came from the 200 million tonnes of coal and the 50 million tonnes of iron ore and iron products which 1522 they shifted. Those areas of the railways' work began to disappear. I remember going through to Edinburgh even quite recently. There were little mineral yards at every station. They were all at a sufficient distance apart to allow a horse and cart to carry bags of coal around. All that has gone because we get our energy either through pipes or through wires.
The railways have had a very difficult time but they have done a remarkable job. The feeling coming through in many of the speeches today is that British Rail is a very efficient organisation. The noble Lord, Lord Marsh, gave the figures for rail investment per head; the United Kingdom, seven dollars; Italy, 50 dollars; France, 37 dollars; and Germany, 24 dollars. It is quite remarkable that we can run such an efficient railway.
The noble Lord, Lord Boyd-Carpenter, can make a great speech out of anything. We have all seen that over the many years that we have known him. He made a very good speech on this Bill. I know exactly how the noble Lord feels. He talked about the niggling difficulties of travelling by rail and said that that is one of the impressions people have of the rail industry. He referred to Paddington station. The noble Lord has some knowledge and experience of the airline industry. Nearly every Monday morning I find myself hoping that someone will telephone Heathrow to say that the Glasgow shuttle is on its way, because they do not seem to know that it is coming. You land and they have to send for buses. You forget once you are on the tube and on your way, but it is extremely irritating and niggling at the time. By and large British Airways and British Railways give an extremely good service. The noble Lord made one point with which I completely agree— after last night, no more late nights. Perhaps it would be helpful if we put it to the Government that there are such things as Fridays.
My noble friend Lord Eatwell spoke about investment and the railway supply industry, subjects close to my heart. In Springburn, in my part of the world, 39,000 steam locomotives were built, of which around 19,000 were exported. That industry has all gone. There is nothing left. There are supermarkets and that kind of thing there now. We have lost a great skill. If we fail to do something about the industry which is left in other parts of the country, we shall lose that as well. We must have investment now if we are to save what is left of our manufacturing industry. Without it, we, who gave the railways to the world, will be in the ridiculous situation, if we want to expand later, of having to buy our engines from Czechoslovakia, Germany, Austria or such places.
The noble Lord, Lord Stodart, spoke about the days when the train fare from Edinburgh to London for a boy was £1 3s 7½d, or something of that order. It is all relative. I remember just before the war that the third-class fare from Glasgow to London was £3 7s. A tradesman's wage was about £2 10s. So we have to make a balance. In that respect I believe that British Rail is not doing too badly.
One of the factors which will give the railways a great future is the PTEs and PTAs. The Clyde system is the biggest outside London. It is extremely effective and I do not know how we would manage without it. 1523 If we wish to cut down on traffic in towns, that is the only way in which it can be done. I believe that we can get a little more heavy traffic on rail, but I do not believe that we should pretend that we can really make a big impact on the lorry. There is, whether we like it or not, less flexibility as regards rail, sad though that is. We can do a great deal, but there are difficulties. The real value of the railway is taking people tight into the towns.
The noble Lord, Lord Brabazon, spoke about the possibility of the 44-tonne lorry delivering to railheads. What worries me about that is that when he was a Minister at the Department of Transport he must have gone to Europe often enough with strict instructions to resist the introduction of the 44-tonne lorry on to ordinary British roads. If we had that lorry just to serve the railheads that would be done on the main roads. Those lorries, I understand, are not only big and clumsy; there might also be a big problem for our bridges, although by adding another axle the problem could be overcome.
My noble friend Lord Ewing of Kirkford, in his usual, inimitable way, made a powerful speech. He was clear that British Rail was in serious need of modernisation. He put forward the possibility that Stagecoach might be one of the organisations which would go for the franchise.
The noble Lord, Lord Marsh, and many others asked whether the Government have any names of those who are likely to be franchisees. It was also asked whether there would be more than one and whether there would be the possibility of selecting one or the other. We have not had an answer to that.
We respect the noble Lord, Lord Mountevans, for his great knowledge of the railways and for his courage in the modern world of being one of the few people I know who does not have a driving licence. He produced very many interesting statistics, drawing on his knowledge. He said quite correctly that in many ways British Rail is the operator of last resort, which is not an unimportant matter.
Then we had tales of woe. British Rail management was referred to by the noble Lord, Lord Marlesford, among others. If it is so inefficient why does the rest of the world honestly believe that it has very high standing? Although the noble Lord is generally in favour of the point of view of the Minister, he believes that this is the wrong Bill and that we need a different one.
The noble Lord, Lord Greenway, spoke about containers at Felixstowe. Possibly, we made some mistakes in our earlier thinking on their use. Again, there is a problem with distances. One cannot move containers efficiently by rail unless there are train loads of them and in our country it is not as easy as that. The noble Lord, Lord Auckland, favours competition but he does not believe that we shall get it in this Bill. He too has grave doubts about the Bill.
It is pleasing to see my noble friend Lord Greene of Harrow Weald in his place again. He spent 50 years on the railways and spoke about British Rail's great efficiency compared with other world railways. He 1524 spent 20 years as a railwayman and 30 years as a railway trade union official, so he has probably been on more railways than most.
The noble Lord, Lord Braybrooke, was doubtful about the Bill. He said that we must build more railways and referred to the Beeching cuts, as did the noble Lord, Lord Tordoff. When the 1968 Act was introduced we in Strathclyde ordered that the solum of all the disused tracks should be left in case they were required. It so happens that quite a number of the tracks from the old Beeching lines that were cut have fitted in beautifully, and we now have a pretty good passenger transport system.
The noble Lord, Lord Tordoff, put things clearly when he spoke about the lack of objectives in the Bill. He could not see how there could be any competition but, like the rest of us, he "looks forward"— if that is the correct phrase— to a good four or five days considering the Bill in Committee when we shall be able to discover exactly what the Government's views are and whether they really think that there is a future for British Rail.
§ 9.41 p.m.
The Earl of Caithness
My Lords, I am grateful to all noble Lords who have taken part in this debate, and particularly to those of your Lordships who have been able to stay to the end. Undoubtedly, this is a complicated measure and I hope that those of your Lordships who have not yet taken the opportunity of reading the policy guide which is in the Printed Paper Office will do so before Committee stage because there seem to be substantial misunderstandings about some of our proposals.
I have listened with care to what your Lordships have said and know that I shall not be able to answer every question tonight. I agree with much of what has been said and am grateful for the support that I have received for the Bill. However, I disagreed with quite a lot that was said from the other side of the House.
I have been interested by many of the comments that have been made, and especially by those of the noble Lord, Lord Taylor of Gryfe, a former BR director, who said that we should not do anything to BR because it was too busy providing the Channel Tunnel rail link. I did not think that that was a very good argument for not doing anything.
A number of your Lordships have mentioned the alternatives. I am grateful for what the noble Lord, Lord Rodgers of Quarry Bank, said in that respect. He came up with some constructive alternatives which we shall undoubtedly need to discuss. Most of your Lordships who criticised the Bill did not come forward with any alternatives.
Looking at British Rail as a whole, there is no doubt that my noble friend Lord Cochrane of Cults is right that there is a problem with the railways. We have addressed that problem and we believe for two reasons that the right solution is to bring in the private sector. The first reason relates to the management expertise and ethos of the private sector.
I was disappointed that the noble Lord, Lord Marsh, misrepresented some of my comments about privatisation. I was not saying that this is a 1525 conventional privatisation. The point to which I was drawing attention were the benefits which the private sector has brought to the transport industries that have been put into the private sector. I agree totally that this is not a conventional privatisation. If it was, this would be a different Bill and different proposals would have been placed before your Lordships. Indeed, I spent some time going through the reasons why I thought this was different and explaining our proposals.
With regard to the private sector, I noted with care what the noble Lord, Lord Greenway, said and his valid points about the ports. I was particularly interested in what he said about possible port interest in the railways. I welcome that interest.
The other area where the private sector is of undoubted benefit is investment. Despite the fact that investment in the railways is at a 30-year high, my noble friend Lord Boyd-Carpenter and the noble Earl, Lord Attlee, were right to point out that there is a limit to taxpayers' funds. My noble friend Lord Boyd-Carpenter was equally right to stress that one cannot have private investment in a nationalised industry. The issue of investment was raised by most noble Lords. Our proposals are that infrastructure investment will be the responsibility of Railtrack. Decisions will be commercially driven. Investment will he funded largely by charges levied on operators. That will include subsidised charges paid by the franchisees. So in future, as now, investment will be supported by public funds. In addition, the Government are committed to providing direct support for infrastructure projects where costs are not recoverable fully from operators, and where that can be justified by wider benefits. That is a significant new step for the railways which should not be underestimated.
Investment in rolling stock will be for the private sector. That is where we have the opportunity of benefiting the railways. I do not accept the scepticism of some noble Lords on that point. The private sector has already invested heavily in freight rolling stock. Why cannot it do the same on the passenger side? The costs of rolling stock investment for franchisees can, and will, be covered in subsidy payments by the franchising authority.
I listened with care to what the noble Lord, Lord Marsh, with his great experience, said about international comparisons. He will know, as I do, that that is dangerous and tricky territory. He mentioned France in comparison to Britain. But of course one has to bear in mind that the interest on the debt that the French have to pay is over one-third of their annual subsidy. Their interest amounts to £1.3 billion annually, that being over one-third of the government subsidy of £3.3 billion. In contrast, our interest is £81 million. The German railways are expected to lose about £5.5 billion in 1992. What is interesting, and has not been mentioned, is that soon after we made our announcement about the restructuring of railways, the German Government made a similar announcement last summer, and their legislation is expected to follow shortly.
My noble friend Lord Lyell stressed the importance of securing value for money. That is not just about 1526 finding the cheapest operator to provide services. It is also about the quality of service and transferring risk. The purpose of franchising passenger services is to maximise the involvement of the private sector. Despite the fact that many services are, and will continue to be, loss-making, we believe that that is the best way to achieve the improvement in services that we all want to see. As I have said, what the industry badly needs is a shot in the arm of new private sector management, bringing fresh thinking and innovation to the running of services, and private sector capital to bring forward new investment. We shall not achieve that with the continued operation of services by the public sector.
To the noble Lord, Lord Tordoff, I say that we believe that private sector operators will focus more clearly upon passengers and their requirements, recognising that, as in any business, one has to respond to one's customers if one wants to sell a product.
We want to see British Rail staff bidding for franchises on the basis of management-employee buy-outs. To the noble Lords, Lord Clinton-Davis and Lord Tordoff, and the noble Baroness, Lady Stedman, I say that allowing BR to bid, as a nationalised industry, would wholly undermine that aspect of our proposals. Clause 128 provides for BR to give financial assistance to its management and employees in the preparation of bids to run franchise services or take over other parts of the board's business which are to be sold outright.
Allowing BR to bid would be the surest way to undermine potential City interests, because BR would be bidding, as my noble friend Lord Boyd-Carpenter said, on the basis of using risk-free public money. BR is not accountable for its budgets in the same way as a private sector operator would be. If a franchise is awarded to a private sector operator whose bid was for a £1 million subsidy, then that is how much he will receive. He will not be able to come back for more. He will need to be properly capitalised to bear that risk.
§ Lord Clinton-Davis
My Lords, I am grateful to the Minister for giving way. Will he concede, as he has in previous debates, that there is no way in which the Government can exclude a state railway of a European Community member state from entering the franchise stakes?
The Earl of Caithness
My Lords, the noble Lord has raised that matter with me on previous occasions. I give him the same answer; of course, we shall abide by the European Community rules, which goes without saying. I refer the noble Lord to the point which I made: that we are looking for private sector involvement. The franchising director will take that into account.
We have also made it clear that when considering prospective franchise bids the franchising director will take fully into account the cost of British Rail continuing to provide a service. BR will be running each of the groups of services to be franchised in a shadow franchise before each competition. That deals with a matter raised by the noble Lord, Lord Rodgers of Quarry Bank. The purpose of having a shadow 1527 franchise is to check that the grouping can function properly and make good operational sense and to provide a financial track record. The franchising director will, therefore, have a sound basis for checking how much it will cost if BR continues to run the services and will take that into account when judging bids from the franchisees.
I say to the noble Lord, Lord Greene of Harrow Weald, that although in 1922 there were 104 operators, we are not that ambitious today; we shall be going for about 25 franchises based on the existing profit centres. I assure my noble friend Lord Braybrooke that the preserved railways such as the Bluebell line and the Keighley and Worth Valley railway line will be exempt from the franchise.
Although I have given considerable reassurance about the future of railways and the subsidy needed to keep open the existing railway system before it goes into the franchise state, the noble Earl, Lord Glasgow, firmly contradicted me and said that he believed there would be a reduced service. I reiterate to him and to the noble Lord, Lord Tordoff, that the franchises will take place on the existing BR timetable. Therefore, the noble Lord, Lord Tordoff, was wrong in a great deal of what he said.
The noble Lord, Lord Redesdale, and my noble friend Lord Auckland went further and said that it would not be a question of reduced services but one of closures. As I said in my opening remarks, which bears repeating, there is no hidden agenda for a programme of closures. The doubts which have been expressed about closure procedures or the potential effects of privatisation are unfounded and lead to unnecessary anxieties, in particular in communities which may depend on lines which rely on subsidy.
First, the Government have said on many occasions that subsidy will continue to be paid for loss-making services for as long as is necessary. Secondly, the closure procedures in Clauses 32 to 42 are as rigorous as now, but they have been adapted to reflect the new structure of the railways. There is absolutely no reason to suppose that privatisation will lead to more closures. Thirdly, the consumer committees, in which the noble Baroness, Lady Stedman, was so interested, will continue their important role. It is being strengthened and I am sure that she will welcome that. The committees will comment and report on the levels of service, the effects of closures and the efficacy of the closure procedures. They will also have the right to publish reports independently of the regulator. Although under the new procedures the regulator will take the decision, there will be the right of appeal to the Secretary of State.
The noble Lords, Lord Clinton-Davis, Lord Ewing of Kirkford, Lord Tordoff and Lord Taylor of Gryfe, mentioned the apparent added complexity and bureaucracy of our proposals. I believe that their worries are unfounded. One result of our proposals is that certainly there will be a series of contractual arrangements between the various players in the railway. But many of those arrangements already exist. They are internal within BR as a statutory 1528 monopoly hidden from public view. Indeed, my noble friend Lord Lindsay termed the present position as "peace in obscurity".
Perhaps I may take your Lordships through some of those points. The franchising director will carry out some of the functions which BR already carries out in terms of specifying railway passenger services and allocating government subsidies between them. Railtrack will also carry out functions currently carried out by BR; for example, the operation of the infrastructure, timetabling and so on. Most of the other bodies involved already exist. The HSE is already the safety authority. PTAs and PTEs are already involved in the provision of railway services. It is only the regulator who will carry out significant new functions, but I am sure that the House will agree that those are necessary to ensure fair play under the new regime.
As a result of our proposals, those relationships will become a lot more transparent and I hope that the House will welcome that. Greater clarity will encourage efficiency and operators will know where they stand. I see that as a positive advantage of our proposals.
My noble friend Lord Stodart of Leaston and the noble Lord, Lord Tordoff, raised the question of competition. I wish to say a few words about that. There are three elements. First, there will be competition for franchises. Franchises will be put out to tender. The competition between bidders will determine who runs passenger rail services. I hope that that allays some of the anxieties expressed by the noble Earl, Lord Glasgow.
Secondly, there will be some competition between franchisees. Some routes will be served by more than one franchisee and passengers will have a choice of operator. Franchisees can also be expected to compete to provide innovative services to attract passengers.
Thirdly, there will be open access to the network from 1st April 1994. That is particularly important for freight services where operators will be free to compete on a commercial basis for freight business. We have made it clear that the right of access must be moderated to allow for the first franchises to be successfully established. However, there will be opportunities for open access passenger operators and we expect that to develop over time.
I turn now to the important question of freight. Rail freight accounts for about 7 per cent. of total traffic carried by road, rail, coastal shipping and pipeline. The noble Earl, Lord Attlee, reminded the House of our incentives to encourage more freight to travel by rail but still some 10 times as much freight goes by road as goes by rail. The total amount of rail freight is equivalent to one year's growth of road freight in the late 1980s. To move one-third of the freight from road to rail, as the noble Earl, Lord Glasgow, suggested, would require a two-and-a-half-fold increase in the amount of rail freight. That is quite impracticable. Many forms of freight such as delivery to supermarkets are simply not suited to rail transport. Indeed, the noble Lord, Lord Carmichael of Kelvingrove, was realistic in addressing that problem. He said how difficult it is.
1529 As regards freight, I should say to my noble friend Lord Brabazon that I noted carefully what he said about the closure procedure but that procedure is exactly the same as under existing rules. There is nothing new in the Bill in that regard. I look forward to discussing that with him at a later stage.
My noble friend also asked about the privatisation of Railtrack. I can confirm that we intend to privatise Railtrack as soon as is reasonably practicable. Of course, we have the flexibility to do that in a number of ways. I listened with care to those of your Lordships who argued for vertical integration. In the meantime, Railtrack will be required to contract out its support activities where that represents value for money.
As regards the track access grant for marginal freight, I agree with my noble friend that the rules for the new grant must be clear and the procedures for rewarding grants must be rigorous. Therefore, we shall publish and seek views on draft guidance for applicants before the new grant system comes into force.
I turn now to the question of the London Travelcard. I said that I should mention it today in our debate on London Transport last Wednesday. As the noble Lords, Lord Clinton-Davis and Lord Tordoff, and my noble friends Lord Mountevans and Lord Teviot said, the London Travelcard is popular because of its simplicity for passengers and its extremely good value for money. It has also been beneficial to operators and has increased public transport use. Against that background, we are very confident that the Travelcard will survive, although it may well need to change. Under the Bill, the franchising director will have the power to require franchisees to participate in multi-modal ticketing schemes. My right honourable friend the Secretary of State will give him guidance on the exercise of that power. Franchisees will then be obliged to participate in such schemes in accordance with their franchise agreements.
The noble Baroness, Lady Stedman, raised the question of representation for passengers. I have briefly commented on that issue. I believe that some of the matters she mentioned were a little out of date. I think that we have moved on. I also believe that she will be pleasantly surprised when we deal with the matter at a later stage in our discussions.
The noble Baroness, like the noble Lord, Lord Carmichael of Kelvingrove, raised the important question of PTAs and PTEs. We have often paid tribute to the achievements of PTAs and PTEs in promoting the use of rail in their areas. We want them to continue to do so. I believe that our proposals for privatising the railway will allow them to, but with the added advantage that they too will be able to harness the skills of the private sector to provide a better, more attractive and more efficient service. We have made clear the fact that the PTAs and PTEs will continue to have broadly the same role following privatisation as they have now—specifying and paying for local railway services. The Railways Bill provides explicitly for the PTEs to specify quality and fares levels. Therefore, I must tell my noble friend Lord Lindsay 1530 that Strathclyde PTE will be fully involved in the specification of the franchise in respect of the services that they support.
My noble friend Lord Mountevans expressed concern about the future ticketing and revenue allocation system for the railways. I think that I can give him the assurance that he seeks. Operators will be required to participate in joint arrangements. At the outset they will be based on BR's existing systems which, as my noble friend so rightly pointed out, have the capability to provide integrated benefits across the network.
I turn finally to the remarks made by my noble friend Lord Auckland. He raised the question as to what happens if a franchise gets into trouble. I should remind my noble friend that I spent some time on that issue in my opening speech. Moreover, there is quite a lot about it in the Bill. Again, we shall doubtless come to deal with the matter at a later stage.
We will be discussing many of the issues that were raised today in more detail in subsequent stages of the Bill. Before then I shall try to follow up with noble Lords the questions that I have not been able to answer directly. As our consideration continues, I believe that your Lordships will recognise that many of the concerns expressed today are unfounded and that the Government's proposals provide a sensible basis for a secure future for the railways. In particular, they provide a proper balance between the need to ensure that the railways continue to provide the socially necessary services which we all agree are vital and the need to inject a fresh and more commercial approach into the operation of the railways.
Our proposals represent an imaginative way of bringing to the railways the benefits which privatisation has brought to other industries, but in a slightly different way. I see no reason that the railways should be deprived of those advantages. On that subject, as with so many others, it is this Government who have come forward with innovative but practical proposals. I believe that they represent the best hope for the future of the railways. I also believe that the whole House is on common ground in that we want to see the railways continue and we want to see them prosper. We want to have pride in them. I believe that the Bill will enable us to put such proposals into effect. I commend it to the House.
On Question, Bill read a Second time, and committed to a Committee of the Whole House.