§ 5.20 p.m.
§ Lord Clinton-Davis rose to call attention to the effects of privatisation on the interests of passengers, the carriage of freight by rail and on Britain's railway system; and to move for Papers.
§ The noble Lord said: My Lords, I wish to mention at the outset that the final Railtrack prospectus was not available in this House until late yesterday afternoon. I regret that because Ministers have said that there were disparities between what was said in the pathfinder prospectus and in the final prospectus. It is a little difficult to search through more than 250 pages in order to find those disparities.
§ This Government are purblind to the disenchantment, indeed the antagonism, of the electorate towards them. They are unable to comprehend the messages of the Staffordshire South-East by-election and the council elections. They plough on with their discredited policies, pursing their own course of self-destruction. Privatisation, or rather the fragmentation, of the railways plays a significant part in all of that.
§ Of course, while that may redound to the electoral advantage of the Opposition, my case is that privatisation is against the interests of the nation and of the transport system in particular. There are better ways of dealing with the chronic underinvestment in the railways. No doubt today the Minister will assert that many people are expressing interest in Railtrack shares. But he would be very unwise to equate the readiness of 144 people to accept the sweeteners that are on offer—an obvious inducement—with the propriety and popularity of the policies in the nation at large.
§ I wish to deal first with the contradictions that have accompanied the proposals to privatise Railtrack. I believe that it is a company which is being privatised before it is ready on any showing. What have been omitted from the prospectus are the assertions which were made repeatedly by Ministers in this House and another place during the passage of the Railways Bill in 1993 that the Government had no intention of privatising Railtrack in advance of British Railways.
At that time the then Minister said:
Outright privatisation of all the railway is not on the agenda for the foreseeable future, not least because subsidy from the taxpayer is needed, and we have made it clear that we shall continue to provide that".—[Official Report, Commons, 2/2/93; col. 160.]
§ Of course, the Government have gone ahead in completely the opposite direction with hardly an explanation given to either House.
§ Ministers said that there would be no share options for Railtrack directors. The latest assertion was on 23rd October last year. Now we discover that directors are to double their salaries—that is not unexpected because it usually happens, and I suppose that "doubling" the salary is to put it pretty low—and that that will be paid in shares. That is the complete reverse of what Ministers said.
§ My noble friend Lord Carmichael will recall that during our long debates we were told repeatedly that there would be no problems about a unified timetable. Then we had the fiasco of a 400-page revision due to errors and a further 91-page correction due to further errors. What did all that mess cost?
§ Without any or any proper explanation, they deliberately misled Parliament, just as with such bad grace they accepted an amendment of this House to enable British Rail to bid for franchises. The result, however, is that British Rail has been denied the opportunity and we have a French water company instead.
§ We have a motley group of bidders, some of whom are distinctly dubious. Stagecoach, for example, is a company which has had 22 references made against it to the Monopolies and Mergers Commission. Compagnie Gànàrale des Eaux, the French water company to which I have referred, was described by a French judge as one of the two most corrupt companies in France. As for Resurgence Railways, Ministers were happy to surrender Great Western to a failed double glazing salesman. Had it not been for the vigilance of the Opposition that bid is unlikely to have been thrown out and Great Western management able to take over.
§ James Sherwood—I do not class him with the others—a short time before being handed the East Coast mainline said that the franchising formula was a formula for a no-investment railway. Is that to be his formula? We must remember that that line was so successful under public ownership that it cross-subsidised the rest of the InterCity network.145
All those companies realise that what the Government have done in collusion with Mr. Horton, whose track record in BP was hardly enlightening and successful, is to turn Railtrack into what is essentially a property company. That is how it has been described in seeking to sell the company. A share shop described it in the following terms:
essentially a property company and the land that Railtrack will own could be regarded as one of the most valuable pieces of real estate in the United Kingdom".
It goes on,
the track passes through valuable commercial and industrial sites all over the United Kingdom…It is ripe for exploitation".
§ That is how the Government are selling Railtrack.
§ To conjure up interest in the Government's flawed policies of fragmenting the railway system they have chosen to resort to some pretty questionable tactics, including the issue of a prospectus which in a number of material respects is misleading. I invite the House to consider only some of the dodges. The overall cost of preparing for privatisation of Railtrack has been more than £1 billion. Not a single new railway line, not a single new signalling unit, not a piece of extra track and not a single new train has arisen from that. The subsidies to be paid by the taxpayers to enable the private companies to function are of the order of £2 billion. That is taxpayers' money. Perhaps in the due course of time we shall find that they were even more generous.
§ Then we have the sweeteners. Sweeteners which were devised to sell off public assets are a further massive charge which the taxpayers must pick up. They are excessive by any standards. Railtrack is being flogged off for £1.5 billion when experts calculate that its true value is far in excess of that. Private investors are to receive a 25 per cent. return on their shares in the first year. No wonder they may be interested! The calculations deployed by the Government and their allies are clearly faulty. But never mind, the taxpayers are there to be milked.
§ Then the Government are prepared to write off £1.46 billion of debt, adding to the £22.55 billion which has been written off for privatisation during the years. We never hear from the Government Front Bench about those write-offs. We never hear about those charges to the taxpayers. Incidentally, those write-offs vastly exceed the amounts which have been injected into the industries which have been privatised by the privatised companies. Again, that has been done at the taxpayers' expense.
§ I point out that £69 million-worth of profits were earned while Railtrack was in public ownership. Those sums are now to be transferred to the shareholders. Where did they come from? They come from the maintenance programme.
§ Then we have the substantial bonuses to which I have referred already. They are to be paid to the leading executives. On what basis? It is on the basis that they maximise short-term profits at a time when the railways need not the maximisation of short-term profits but long-term investment.146
§ There is then the question of track access charges. In order to achieve that short-term goal, they are clearly set far too high. As my honourable friend, Clare Short, said when she led the debate on this matter in another place, it costs £175,000 in track access charges simply to put one passenger coach on the railways. She compared that with the £300 to £450 in vehicle excise duty for a coach to be put on the roads at a time when, for environmental and economic reasons, it is vitally important to transfer more freight and more passengers to the railways.
What of the prospectus? There is the extraordinary letter written by Mr. John Welsby, the Chairman of British Rail, on 2nd April to the Department of Transport. He said that the draft prospectus did not give a:
fair view of the vulnerabilities
of the business or the powers of the regulators over Railtrack investment plans. In relation to Railtrack's performance he said that BR had:
serious concerns regarding the service offered on the line in and out of Euston".
§ He went on to criticise the draft for omitting reference to a "significant downturn in performance" of a number of train operating companies over recent months. He thought that that was highly material information for investors, but it was not in the prospectus. I could not find anything in this prospectus about this but perhaps the Minister will correct me if I am wrong. However, it is rather odd that the prospectus is only made available to this House just a few hours before we debate this matter.
§ Railtrack must pay penalties if it breaks its agreement deliberately or otherwise with the railway operators. There are some matters within its control and other matters outside its control; for example, the weather and perhaps even industrial action. A sum of £75 million per year is provided over and above the usual access charges to cover such contingencies. But any performance improvements on the part of Railtrack will not match the amount paid for in penalty payments. Indeed, in 1995—and this is an extraordinary fact—Railtrack paid £80 million in penalty payments, which is £5 million more than the amount allowed for in the prospectus in relation to penalty payments. That appears on page 66 of the prospectus. Those are a few of a number of serious issues which can be raised with regard to the prospectus.
§ What other revelations are there in that remarkable document? It says that Railtrack's passenger access is unlikely to benefit materially from any increase in passenger use. That is not misleading but it is an extraordinary assertion. Therefore, what incentive is there for Railtrack to assist in that vital element of privatisation and the running of our railways? It goes on to say that the opportunities for expanding rail freight operations are limited. How is privatisation designed to stimulate passenger and freight use of the railways?
§ How will investment be boosted? It is certainly needed. Railtrack proposes a £10 billion investment programme over 10 years. That is £2 billion less than 147 the current investment proposed by British Rail. That is the benefit that we are told we shall derive from privatisation.
§ I shall not say too much about safety, but a deteriorating infrastructure does not enhance safety. Today, 50 sections of track on the West Coast mainline are subject to speed restrictions which did not apply under British Rail when it was handed over to Railtrack. Railtrack has been issued with two improvement notices by the Health and Safety Executive which expresses serious reservations about some aspects of Railtrack's policies.
§ Finally, I turn to our alternative policies which are set out in detail as an annex to the prospectus and by the Shadow Secretary of State—she will be Secretary of State—in her speech of 29th March, which is also annexed to the prospectus at page 101. I have only time to paraphrase what she then outlined.
§ Labour will use the extensive powers which are contained in the Act in relation to the regulator; the £2 billion subsidy and the power to acquire ownership to reintegrate the railways under a renewed British Rail; and the public and private partnership scheme, of which I spoke quite extensively in yesterday's debate, to enhance investment in rail and to increase passenger and freight usage.
§ The rail regulator is the most potent of all the utility regulators. He has the power to effect changes in the current regime. He can change Railtrack's obligations and its priorities so that the interest of the public rather than the shareholders can be reflected.
§ Through legislation we propose to make the rail regulator answerable to the Secretary of State. Through those means, we shall be able to control Railtrack's economic behaviour in a number of important ways, including the way in which investment spending is undertaken. We shall establish a different regime for access charging. We shall limit the possible disposal of extremely valuable land assets and we shall give consideration if necessary to clawing back virtually all income derived from property disposal.
§ We shall make Railtrack answerable to the national interest. We shall not allow it simply to search for short-term profits. That will enhance realistically the prospect of greater investment in the rail infrastructure and develop greater use of rail, which is what the country requires. It would have been better not to have embarked on the ridiculous exercise of privatisation, but through the means that I have outlined briefly we shall seek to remedy the curse that the Government have bestowed upon the nation. My Lords, I beg to move for Papers.
§ 5.37 p.m.
§ Lord Astor of Hever
My Lords, I am delighted that the noble Lord, Lord Clinton-Davis, has given the House the opportunity to discuss this important subject. I feel that the noble Lord has scored something of an own goal as this is a privatisation of which we on these Benches can be proud. I believe that Railtrack's stock market debut on 20th May will usher in a new era 148 Privatisation should be a colossal improvement on British Rail as regards which we have all experienced years of lumbering decline and low staff morale.
Rail privatisation will bring entrepreneurial ideas, marketing flair, innovation in services and access to private capital which will improve quality and choice in the range of services available to customers. Most important, it will change fundamentally the culture of the railway industry.
The first batch of new-style train operating companies has been running for only a few weeks but already those companies are brimming with ideas of how to improve efficiency and service, free from the dead hand of "state-producer" culture and Treasury constraints. Privatisation has transformed large parts of our national life and has delivered dramatic improvements in a wide range of transport industries; for example, long distance coach and bus companies, road haulage companies, British Airways and the British Airports Authority.
Privatisation will improve the management and performance of British railways as it has done in those and so many other industries. In terms of the quality, quantity and variety of those services, firms perform far better in the private sector. In 1979 the nationalised industries were losing £50 million every week. Privatised companies now contribute £50 million to the exchequer every week and are able to compete abroad and generate overseas earnings for the United Kingdom economy.
Of course, the Labour Party has opposed every privatisation since 1979 and is trying to derail this privatisation. The honourable Member for Oldham West began by saying, in effect, that no sane investor would contemplate buying Railtrack. But when he was switched by the Leader of the Opposition from transport to employment his successor, the honourable Member for Birmingham Ladywood, insisted that Railtrack was, in fact, full of jewels and was being flogged off at a price that "ripped off' the taxpayer. It must have been demoralising for her when it emerged that two million retail investors had registered their interest in buying Railtrack shares, as the noble Lord, Lord Clinton-Davis, admitted.
It must also have been demoralising for the four shadow Cabinet members sponsored by the main rail union, the RMT. The leader of the RMT expects complete re-nationalisation from an incoming Labour government, in the unlikely event that this were to happen. The honourable Member for Birmingham Ladywood has promised all sorts of evil things should Labour gain power. In the absence of a policy, the Labour Party is reduced to making scaremongering threats. However, I wonder whether Railtrack will be a priority when it is seen that privatisation delivers a better service. British Rail has become weighed down by its own unionised culture and monolithic structure. As the Economist wrote last year,waste remains endemic; when a railway in a small country employs 35,000 civil engineers, something is amiss".Rail has been notorious for its anti-consumer culture: queues, crowds, and poor communications; indeed, 40 per cent. of all telephone calls are unanswered 149 within 30 seconds. How many other companies neglect potential customers to such an extent? Now rail operators will have to co-operate with each other to meet the tough, new performance standards that the regulator has set to improve the services. TOCs (train operating companies) will be responsible for ensuring that calls about their services are answered promptly, even if they come through to another TOC. That means that train operators will have a shared interest in producing a fast and efficient national TEB (train enquiry bureaux) network.
I understand that the RailDirect facility will be upgraded to handle several million extra calls a year and that steps are being taken to establish a single, national telephone number for train inquiries to come on stream later in the year. If local lines are busy, callers will automatically be switched to a TEB elsewhere in the network.
I am looking forward to new private sector management skills being introduced which should transform the attitude of those working in the industry. We should see upgraded facilities for business class travellers, improved facilities at stations, with particular emphasis on passenger security measures, improved access for disabled passengers and passenger lounges. We should also see dedicated bus links to selected stations, improved customer information and lighting on stations, refurbished rolling stock, faster services and extra ones on Sunday. I was delighted to see that the National Express Group plc aims to introduce on-board check-in facilities on the Gatwick Express for airline passengers in Club Class.
Rail's share of the freight market has been in decline since the 1920s. I believe that that decline can be checked and reversed through privatisation and liberalisation of rail freight services. In a few years, customers will be enormously grateful for this privatisation. It will focus operators' minds on the need to treat consumers as customers rather than their being made to feel as though they are an encumbrance to the running of the railway, instead of the reason for it.
Therefore, I feel that privatisation will have very positive effects on the interests of passengers and the carriage of freight by rail. I congratulate Her Majesty's Government and look forward to a railway system that provides an improved service at lower prices.
§ 5.45 p.m.
§ Lord Methuen
My Lords, I am pleased to be able to support the noble Lord, Lord Clinton-Davis, in today's debate and I thank him for his introduction to it. I come to the debate with a strong feeling of scepticism at the Government's attitude to rail privatisation. However, listening to the previous debate, I was struck by how much of what was said is applicable to this debate and the subject of competition.
I read the debate in the other place on 17th April. One phrase stands out to me, which I shall paraphrase:Railtrack's assets will increase enormously [by investment in stations, land and other infrastructure] to the benefit of shareholders who will buy into Railtrack in the coming months".150 Noble Lords should note that there is no mention of any benefit to the travelling public or freight operators.
A recent television programme suggested that Railtrack's investment in infrastructure is vastly underestimated at £1.4 billion per annum. The York Report suggests that a figure of some eight times that amount—that is, £10 billion a year—would be nearer what is actually required. It has been suggested by the consultants, W.S. Atkins, that a significantly higher figure would actually be relevant. The lack of investment in maintenance may well result in an insuperable maintenance backlog, speed restrictions and line closures. Indeed, those have already been mentioned as being applicable to the West Coast main line. The speed restrictions themselves are likely to make lines less economic and hence drive away would-be passengers.
The railways used to pride themselves on their safety record. Now we have Euston Station (the hub of the West Coast main line) closed by the railway inspectorate for emergency maintenance as the track is too dangerous to use. Then we come to track renewals. A figure of less than 1 per cent. per year has been suggested, resulting in perhaps 125-year life. British Steel and long-welded rails may have improved track life but that should be compared with the 30 to 40 year life expectancy on the Continent.
Perhaps I may now turn to the rail operating companies. It is good to hear the old names—for example, the Great Eastern, the Great Northern and the Great Western—coming into use again. I hope that they will succeed in living up to the traditions of their forebears, though I hope that the suggestion of a Member in the other place of reverting to Brunel's seven-foot gauge is not taken up! It is also suggested that local communities might take over the running of certain marginal branch lines. That harks back to the inter-war years when an enterprising railway engineer, Colonel Stevens, ran a series of rundown country railways using dilapidated, second-hand equipment, all of which I believe has now disappeared. I hope that that is not what our customers will get in such an instance.
We need a proper integrated and co-ordinated railway system, with guaranteed connections and consistent timetabling. Recently Midland main line suffered a major disruption to service, leaving its timetable in chaos. That did not prevent Regional Railways dispatching my local service five minutes before the train from St. Pancras arrived. The regulators in large power-operated signal boxes, such as Derby, have visibility of operations over a wide area, but Regional Railways do not connect with Midland main line. That is the sort of frustration which privatisation is bringing and which a recent European Union Green Paper on transport attempts to forestall by the linking of long-distance and local services. It is the sort of thing which really drives people back into their motor cars.
I have said nothing so far about freight traffic. In general we suffer in this country from having too short freight hauls to make railway freight economic at distances of less than about 200 kilometres, although there are obviously exceptions for certain train load 151 traffic. I hope that increasing use of the Channel Tunnel to convey freight to and from Europe, and the use of piggy-back vehicles may have a positive effect, but I am not hopeful of any significant transfer from road to rail. That opinion is supported by the almost total lack of any freight handling facilities at even the largest stations.
I wish to make two further points. First, I refer to the almost total destruction of the British railway rolling stock industry due to the lack of orders for new stock, caused by the hiatus of privatisation. Not even the antiquated "slam door" stock in the south east has been replaced. Does this mean that we have lost yet another industry in which we were supreme to Europe and to the Far East? Secondly, can the regulator do something about the ludicrous situation of rail vehicles being carried by road to maintenance depots due to the excessive charges levied by Railtrack? It must be obvious to everyone that there is something seriously wrong with our transport system when something like that occurs. What the railways need is long-term investment in infrastructure and rolling stock. I hope that privatisation will bring that about. We shall see.
§ 5.50 p.m.
§ Baroness Castle of Blackburn
I wish to congratulate the Government on having at last, after 17 years, produced a consultative document, Transport—The Way Forward. It is very green. The delicate green of the print is so faint that one can hardly read it. Of course it does not commit itself to anything. Oh no, after all there will be an election within a maximum of 12 months and that would be rash for this Government.
It is admitted that a year ago, after 16 years of Conservative Government, the present Minister of transport's predecessor, Brian Mawhinney, said there must be a national debate on transport. Therefore they went out to other bodies and there were consultations and the rest of it. We are told that this marvellous document highlights the areas of greatest concern. Some of us could have done that when the Government first came into office, and indeed we were doing so. Those areas of great concern have hardly been shy violets. The public have been screaming aloud about the growing congestion on our roads, the deliberate running down of our railways by this Government, and the growing menace of pollution, and absolutely nothing has been done.
I think the House will agree that I am about the most modest Member of it, but I cannot help contrasting the concern of this Government for transport problems—which we all admit are haunting us—with my own. Transport Policy is admittedly a much smaller document. I produced it after seven months, not 17 years and it is a White Paper. There is not a bit of green on it anywhere, because we were laying down policy in it; we had given thought to it before we entered Office. We discussed the matter and we produced documents. Any intelligent politician will have consulted on, argued and thought about transport problems in this congested little island ever since he or she entered politics. Therefore we were ready with our own approach. To cap it, the 152 White Paper was followed 10 months later with the largest and most comprehensive transport Bill in this country's history.
Our approach was to say that because we are all living on top of each other and because the precious green areas of our country are shrinking all the time, we must have an integrated transport policy. We must cast aside the follies of the Tory Act of 1962 which stated that road and rail must be in competition to see which survives. We are still dealing with the result of that approach. I could not help but contrast not only the sluggishness of this Government in facing up to these problems but also the whole philosophy with which they have approached them. The Government are utterly confused about transport policy. Of course you cannot have such a thing as an integrated transport policy, which is only really possible if the major units are under public ownership! No, that will not do, they must have competition and so they must fragment the system.
I also cannot help contrasting the speed with which they are now pressing ahead with rail privatisation policy with the slowness with which they failed to produce a comprehensive transport document. Does not the motivation stand out a mile? The Government beg us in this transport policy "greenery" to have a consensus. We must think about it; we must not rush it; certainly we must not decide anything this side of the general election in case anything we decide is a bit unpopular with someone. Heaven knows the Government are desperately in need of any votes they can scavenge from anywhere! I sympathise with their mood but would you not have thought that common decency would have made them say, "OK, we cannot go ahead with unpopular decisions that might be involved in an integrated transport policy, so we shall hold up rail privatisation as well, instead of indecently pushing it ahead as quickly as possible." They are fragmenting, not integrating. They are chopping up the rail network into little bits and selling them off to the highest bidder and then dare to talk of a comprehensive transport policy. Why have they done it? They have done it, of course, to ditch the "reds". It is a combination of dogma and spite. The only motivation behind the present haste in selling off our rail network bit by bit is to present the next Labour government—which they know is inevitable—with a problem. It is a case of, if we cannot save ourselves let us at least make sure we do them mortal damage.
The Government may ask what our policy is. Of course we would not have sold it in the first place. It is true—and the Government know it—that they are planning in the coming general election the most savage and the most ruthless propaganda campaign against the Labour Opposition. If we say we shall buy back anything, they can then retort that people's tax will go up by sixpence in the pound, or any other figure they care to conjure up in their fevered imaginations. That is the tactic they will use to put us on the spot, and never mind whether they put the country on the spot too.
I remind the House of some words that I heard come ringing over Radio 4 this morning. They were spoken by no less a stern authority—a man of stern integrity—than Sir Edward Heath who said, 153The job—the intention—of privatisation is not to provide a service but to make profit. In the process, privatisation may provide a service for some, but not all. That is the automatic result of any economic analysis".He went on to warn his colleagues. He continued:The Government must decide to draw the line and stop carrying on in a dogmatic manner, believing that whatever they do in that sphere is correct. The public have come soundly to the conclusion that it is not correct, which is why the Government are suffering in many ways".—[Official Report, Commons, 7/5/96; col. 1320.]That speech was made in a debate on the Civil Service pension scheme. He was pleading for the protection of our Civil Service. But he also drew a line. He said that there is a major field for privatisation probably in the production of goods but services are different. There is no doubt that the public would agree with him.
The Government know that there is no majority among the people of this country for this rail privatisation. That is why they want to get it through before they lose power. I shall tell you why there is no support. The public are not fools. They know that the Government's sums over this whole unhappy business do not add up. Every time we make a caveat, or enter a little warning to the Government or to the people at large that prices, charges, fares will go up, the reply is, "Oh no, that will all be regulated. We shall strictly control them". We then say, "You'll be cutting rail services," and the reply is, "No, every franchise will contain a commitment to maintain services". So where will the profit come from; or is it being done out of love for their fellowmen?
It is true that shedding labour is already going ahead—that one great panacea for everything in this Government's philosophy. I point out to those who ask, "What about taxation?" that the whole aim of privatisation is to make a profit for the shareholder out of the sacking of thousands. And who has to pick up that bill? It is the taxpayer. That is why public expenditure today as a percentage of gross domestic product is just a little higher than it was in 1979 when we left office. It is higher, despite all the cuts.
As one speaker has already pointed out, the Government are concentrating on short-term profit; and as long as they gain that, it is all right if a chief executive or two fails. He can always retire gracefully with a £1 million pension a year. The Government cannot lose. But the ordinary man and woman in the street can. Public sense is the answer to this mysterious arithmetic which does not add up.
On closures, the Government sense that the only way to make profits when maintaining services on the operational lines is to trim off the less economically rewarding parts.
I strongly support the powerful speech made by the noble Lord, Lord Clinton-Davis, in opening the debate. It is unanswerable. I do not have his mastery of all the figures and details, but I have a knowledge, and so have the public, of what this lot are up to, and the aim of the Government's privatisation stampede. We can see it happening. When the Government have broken the system up in the name of competition, they allow private firms to stick it together again until a public monopoly 154 has become a private one. That is the whole idea. I have to admit that they are very skilful butchers. The swiftness of the hand deceives the eye of the public.
I asked a Question in this House not many weeks ago. I asked why the Government, who had broken up British Rail Freight into three companies, were selling them all to the same bidder in the same deal. The answer I received—
The Earl of Courtown
My Lords, I apologise for interrupting the noble Baroness, but she is now on the 15th minute, and it is a debate in which speakers are time limited to 13 minutes.
§ Baroness Castle of Blackburn
If you had not protracted it, I was about to come to a passionate climax, as is my wont. I must, therefore, just set the scene a little again. It is not my fault if that takes another minute.
The reply that I received was of powerful significance. The reason for agreeing to sell the three companies together, when the Government had said that the whole aim of privatisation was to break them up and achieve some competition, was the market's strong preference for the combined sale. They are the believers that the market über alles must rule; and the market always prefers a private monopoly. We are seeing that in electricity, water, and all over the place.
I suppose it is too late to hope that the Government will change their minds. I hope that the public will see through their manoeuvres; and we on this side of the House will help them to do so.
§ 6.7 p.m.
§ Lord Harding of Petherton
My Lords, I am very grateful to the noble Lord, Lord Clinton-Davis, for initiating this debate. It enables me as a regular passenger on Great Western Trains to praise the improved performance of this privatised line. I am afraid that I do not recognise from both the noble Lord, Lord Clinton-Davis, and the noble Lord, Lord Methuen, any relation to my experience in practice. I am always amused by and lost in admiration for the noble Baroness, Lady Castle of Blackburn. I wish that I could speak as well as she did. However, to be quite honest, I believe that she went into the realms of fantasy in her speech.
I travel daily from Taunton to Paddington and back and have seen the benefits of privatisation on Great Western trains. It was one of the first lines to be privatised. I have been travelling on this line for the past five years. During the first three-and-a-half years the service was disrupted by frequent delays and my train was often late. During the past 18 months, in the run-up to the selling of the franchise on 5th February of this year, punctuality has improved tremendously. In the short time that Great Western trains has taken over from British Rail, the quality of the conductors has changed dramatically for the better. Although there were some who were always good, there were those who were not; and the latter have obviously been moved to other jobs.
155 Punctuality has also improved even more since the privatisation date. Great Western has given me its own figures to back up my own personal experience. Punctuality for the four week period from 1st April to 28th April this year was the best recorded performance since the launch of the Passenger's Charter in 1992. The figure of 95.4 per cent. of all trains arrived on time or within 10 minutes; and 99.8 per cent. of its 3,500 trains in the timetable were operated. Great Western charter targets are 90 per cent. and 99.2 per cent. respectively.
My wife travels to London occasionally on the Sherborne to Waterloo line run by South West Trains. That is the other line which was privatised first; there were two on 1st February. The introduction of new trains—they are called 159s—three years ago under British Rail management made a great difference to the comfort of the journey. However, the punctuality was not at all good until 18 months ago when it started to improve, as it did in my experience on Great Western Trains. That was obviously due to the impending sale of the franchise. Since 5th February she has travelled three or four times to Waterloo, London, from Sherborne for the day. She tells me that her trains were punctual to the minute. Not only that, but the attitude of the staff has improved tremendously. The air conditioning on the new trains has given much trouble. Last summer my wife was nearly boiled alive on one journey. South West Trains tell me that the company will spend a considerable sum to solve the problem. Before privatisation, the investment was not available to do anything about it.
As a bus operator, Stagecoach, which owns South West Trains, is committed to a number of dedicated bus links to selected South West Trains stations. I see no fear of abuse of monopolistic power in those arrangements. That has been one of the sound bites which the Opposition party have used against a bus company owning a rail franchise. Surely that is what is meant by a co-ordinated transport system.
Indeed, I hope that Great Western Trains in future years will be able to improve the transport arrangements in my part of the world. At the moment I take half an hour to go by car from Langport, where I live, to Taunton station. I then take about 10 minutes travelling back the same distance on the train, passing 500 yards from my house. If there were a station at Langport—as there used to be before Dr. Beeching did away with it—the pollution caused by my car would be removed. That must be the case for several other people. Lord Beeching went a bit too far in shutting stations. Maybe it made sense in those days, with the monolithic, inefficient, union-dominated organisation which British Rail had become. Somerton, a few miles to the east, also had a station before Beeching. I should have thought that it would pay to resurrect the stations and run shunter trains to Taunton in the west and Castle Cary in the east, to connect with the mainline trains. Little shunter trains operate in other parts of the country, stopping at small places. I have travelled on one in East Anglia.
Some stations have reappeared. Templecombe, which is only a large village on the south-west line, a few miles east of Sherborne, had a new station some years ago. That was due to the initiative and energy of some locals. After a determined campaign, they persuaded British 156 Rail to rebuild the station. I believe that they raised significant finance to help. The initiative was hard to achieve with British Rail. It should be much easier to persuade a privatised commercial operator to do that kind of thing.
Almost everyone, or everyone if they are honest, finds a car convenient. It gives freedom and flexibility. There is a limit to the amount which railways can contribute to the slowing of the ever-increasing number of cars on our roads and in our cities. However, they can contribute much more than they have done up till now. I believe that with the impending privatisation of Railtrack and the franchising of train operations, we shall have a far more efficient, passenger-friendly and responsive rail network than we have ever had in British Rail. By efficient commercial management, better marketing and making railways a better way to travel, the privatisation of British Rail can do much to ameliorate the bad side effects of the car.
§ 6.13 p.m.
§ Lord Haskel
My Lords, I congratulate my noble friend Lord Clinton-Davis who quite rightly calls for attention to be drawn to the damage inflicted by railway privatisation. Before considering that in detail, it is important to understand why the process of privatisation is damaging. The reason is quite simple. The process is designed to break up the system and smooth the path of entrepreneurs to run the fragments. The proof of that is the shameless way in which the Government reneged on the right of British Rail to bid for franchises, as my noble friend Lord Clinton-Davis pointed out.
The Government's criterion of success is not an efficient and effective railway system which the country needs, but whether profitable private businesses can be created from the franchises. In addition, it is not clear how the isolated decision-making of the various franchisees can work towards a national policy objective. Each franchisee is quite rightly concerned with its own sectional objectives. Perhaps my noble friend Lady Castle is right: the final objective is to stick it all together again and have a private monopoly.
Perhaps the Minister can tell us how the railways can be given an overall strategic direction when the system of railway privatisation chosen by the Government takes us away from an overall transport policy. Surely the aim must be to have a seamless public transport network which meets social and environmental, as well as economic objectives. That could have been possible with Railtrack in the public sector, but it is very different with Railtrack as a private company.
Remember, the main competition to rail is transport by bus, car, truck and aircraft—not other railway systems. Privatisation of Railtrack puts the railways at a considerable disadvantage in competition with the car. As my noble friend Lord Clinton-Davis told us, under the privatised structure it costs £170,000 in track access charges to put an extra passenger coach on the railway lines. He told us that to put an extra coach on to the roads costs between £300 and £400 in vehicle excise duty. Does that mean that the taxpayer is subsidising 157 road vehicles? Yet we never hear of the taxpayer's subsidy to road vehicles, all we hear about is the taxpayer's subsidy to railways.
Freight by rail is at a similar disadvantage. Access charges paid to Railtrack are up to 60 per cent. of the revenue paid by the customer, whereas access to the road system costs about 20 per cent. of the revenue.
So how will that affect the passengers? First, the way the railway system has been split up bears little relation to the way passengers use the railway. I agree with the noble Lord, Lord Methuen, that most users want to buy a national, seamless network. However, since the national campaign has been run down, InterCity sales have begun to stagnate. The noble Lords, Lord Harding and Lord Astor, are mistaken in speaking of early signs of improvement. The figures reported last week are that punctuality in all but seven of the 25 different service groups had fallen. Also, trains are now more likely to be cancelled. Even East Coast mainline—the showpiece—has had to report more late trains. If passengers are to be attracted back to the railways, punctuality is surely one of the most important elements.
The noble Lord, Lord Astor, spoke of how the telephones will be answered more quickly. That has been overtaken by new technology. Contrast it with the way information technology has revolutionised the commercial aspects of airline operation and its timetabling. The French are making systematic attempts to build an IT rail information system which they are selling world-wide. We hope that we will benefit from it.
As other noble Lords have said, the future success of the railways will depend on investment. Can the Minister explain to us what are the obligations of the franchisees to invest in new trains and what are the penalties if they do not do so?
In the debate that took place in another place on 17th April, the Secretary of State for Transport spoke of lavish plans for new investment in rolling stock, but said little about actual commitments. At cols. 730 and 731 of Hansard, he said:Great Western plans to introduce more trains".Gatwick Express plans similar improvements. Each new franchisee plans new investment in the network. National Express plans to have completely new rolling stock by 1999. The franchisee on the InterCity East Coast line plans to spend more than £17 million. The only obligation to invest is for the South Eastern franchisee with a 15-year franchise. With seven-year franchises I can understand the operating companies being reluctant to make a firm commitment to supply new equipment—equipment that should last 15 to 20 years—unless, of course, there are sweeteners in the form of subsidies or property, about which the noble Lord, Lord Clinton-Davis, told us. Unless these investments are made, the major impact of railway privatisation will be to squeeze the maximum amount of life out of the existing equipment—with all the implications that has for safety and punctuality.
The sad thing is that, if there should be orders for new trains, our train manufacturing industry has virtually disappeared. It is geared up to deliver only 158 small orders and cannot deliver trains quickly, as a seven-year franchisee would require. The noble Lord, Lord Methuen, is right. The Government's muddle over privatisation has destroyed our railway rolling stock industry. Shall we see in railways a repetition of the occurrence in the bus industry following privatisation, where very little is being invested in new buses and the nation's bus fleet is dwindling and ageing?
The adequacy of money for investment in Railtrack is equally uncertain. To use Railtrack's own words, it needs £800 million a year to maintain the track in its present state. Renewals require £570 million a year, making a total of £1,370 million. From reading the prospectus, it seems that £1 billion a year could be available for investment. Is that why the word "electrification" does not appear in Railtrack's 10-year investment plan?
As my noble friend Lord Clinton-Davis said, the biggest loser in all this is the taxpayer. The massive costs of fragmenting the system, write-offs, and preparing it for privatisation—nearly £2 billion—is greater than the £1.75 billion the taxpayer should receive for Railtrack. Added to that, sweeteners in the form of taxpayers' property being handed over with Railtrack are enormous. Already land around King's Cross and elsewhere, handed over to the private sector with Union Railways for the channel rail link, has been valued at well over £1 billion.
In March 1995, Railtrack's property was valued at £1.4 billion. The importance of the property element in Railtrack is demonstrated by the fact that it employs 1,100 staff preparing development strategies for 14 of its largest stations. The Government are deliberately ignoring that and using it as a sweetener, in exactly the same way as they ignored the retail potential of airports when the British Airports Authority was sold off in 1987. Retail space now brings in £350 million a year to the airport authority.
Certainly the Government have introduced a property claw-back mechanism; but it is entirely inadequate. Railtrack will be able to keep 100 per cent. of its property income up to £1 billion over the next six years and the regulator will then be able to claim 25 per cent. of the excess. That will be passed on to the privatised train operating companies and not to the taxpayer. Surely the right thing to do here is to plough all property profits back into the railways.
Of course there is investor interest in the flotation of Railtrack. Everybody can recognise a bargain. You can always sell something if you reduce the price enough. That has been the history of previous privatisations. Electricity was sold for £15 billion and is now worth nearly £35 billion. The price of Railtrack has been cut and extra dividends added to the point where the effective yield will be about 25 per cent. in the first year and 7 per cent. in year two. "Priced to go", as the brokers say. I asked a broker about Railtrack being a long-term investment. His response was: "Would you invest in a regulated property business?"—confirming the view of my noble friend Lord Clinton-Davis. It is a very attractive deal to the short-term speculator.
159 That is to be the basis of future investment in our rail infrastructure system. Once again we are going to have shareholders benefiting at the expense of taxpayers, due to the dogma and incompetence of the Government.
§ 6.25 p.m.
§ Lord Cadman
My Lords, I add my thanks to the noble Lord opposite for tabling this Motion. It gives us an opportunity to discuss an extremely topical subject. From my point of view it is especially welcome, as railways have always been a subject dear to my heart. After some initial misgivings, I have to say that I welcome their transfer to the private sector.
The trouble with public ownership is that such an enterprise has only to fulfil a function. It is not really necessary, or indeed desirable, to make large profits other than those needed to finance improvements or renewals. Decisions about almost anything have to be justified within the available finance, which is all too often restricted by government policy, political interference or lack of funds due to competition from other government departments. Railways do not pay, so Treasury officials and politicians, who probably do not like travelling by train anyway, are loath to throw good money after bad. The railways are full of people who have to live under that sort of regime. That must go a long way to explain why there have been so many incidents recently that have enabled the media, and especially the specialist media, to be so critical of the privatisation process.
Perhaps it explains why Railtrack has introduced a regime of approving and certifying equipment to he used on its tracks—a process not unlike the type approval of a motor vehicle under the construction and use regulations. That regime has resulted in an embarrassing impasse, with new equipment languishing out of use simply because the technology of today's trains is too far advanced for yesterday's railways. Decades of public ownership seem to have failed the railways. Only 30 or so years ago, the West Coast main line out of Euston system was electrified and upgraded to allow 100 mph running. It is now worn out and in need of total refurbishment.
So what benefits can we expect from privatisation? For a start, proper commercial decisions can be made without seeking political approval. Of course, any management decision has to be commercially viable, but there are many more ways to skin a cat than that which went on before.
The new train operating companies, six of which are now up and running with three others imminent, will be consumer-driven. Their profitability depends on their ability to win customers, the travelling public. It is significant that management buy-out teams seem to be in the minority, which will result in new people with new ideas and probably a different approach. It also justifies the franchising director's decision that it would be inappropriate to allow British Rail to bid for the franchises.
Freight has been the most neglected area of railway business. The independence of being able to transport goods by road in trucks to wherever is necessary is very powerful competition. However, it seems to have gone 160 too far and our roads are becoming over-subscribed. The railway system is capable of much more in that regard. The Piggyback Consortium, along with others, is actively exploring the carriage of road trailers by rail. The sale of the greater part of the freight business to the Wisconsin Central Transportation Corporation is to be welcomed. It is a very enthusiastic and practical operator and, as such, has been very successful in turning round ailing railways in many parts of the world. There is no reason to suppose that it will not be successful here. There is the potential to win freight business back to the railways and the arrival of that company bodes well for the future.
My only reservation with regard to the success of privatisation is Railtrack. Railtrack's behaviour recently has been very strange and seems to have been extremely negative. Perhaps that is because it has been labouring under a sort of public ownership yoke. Once in the private sector, perhaps it will throw off that yoke and positively embrace the enormous task that lies ahead.
Worryingly and uniquely among privatisations so far, Railtrack will not be consumer driven as, in the main, its customers will be the train operating companies, many of whom show considerable signs of improving the services. That will depend on Railtrack's co-operation. Thus, it is vital that Railtrack realises that its success depends on its ability to deliver a modern, up-to-date system of infrastructure fit for the 21st century.
We are now connected to Europe via the Channel Tunnel. Travellers have access to the railway systems of other countries where, somehow, considerable strides seem to have been made in modernisation and improvement. We now have a new international station at Ashford which, having been opened under British Rail's stewardship, has now been handed over to the private sector. It is well accessed locally but lacks services from further afield. There is a service from Brighton, but the equipment is well past its sell-by date. I wonder which of the train operating companies will be brave enough to connect Ashford with the rest of the country via, let us say, Reading. Eventually, under privatisation, such a service should not be difficult to introduce and could be very successful given good marketing and a fast, comfortable transit time.
My other hope is that the train operating companies will pay particular attention to parking cars at stations. I feel that the convenience of the motor car is the main competition from which the companies will suffer. Any means that can be devised to encourage motorists onto the trains must be cost effective. The co-operation of Railtrack and local authorities is vital, as land will need to be made available at suitable locations. Car parking has been well addressed in some areas in the past but there is considerable scope for improvement, which should result in increased ridership. Let us hope that such innovations and improvements become commonplace in due course and that the privatisation of the railways will be of great benefit to the nation.
§ 6.31 p.m.
§ Lord Berkeley
My Lords, I congratulate my noble friend Lord Clinton-Davis for introducing the debate at 161 a very important time in the development—or not, I suppose—of our railways. I also congratulate my noble friend Lady Castle, who referred to the famous Green Paper which was published last week. I hope that the Government will be able to find time to debate it before the Summer Recess. It is a very important document, even if it does not say very much. I declare an interest in Eurotunnel and ADtranz and in the piggy-back consortium to which some noble Lords have referred.
The pressure to sell off the railway family silver before the election is reaching almost panic proportions, as my noble friend Lady Castle said, with franchises for passenger trains, possibly Railfreight Distribution, Railtrack and many smaller parts of the former British Rail—I suppose they are still part of British Rail. I visualise the privatisers not, in the terms of the noble Lord, Lord Cadman, as cats to be skinned but as a herd of friendly, committed, Gadarene swine hurtling faster and faster over the cliff, in the absolute conviction that they will land unharmed beside a welcoming trough of food while the rest of the world looks on in disbelief. The trouble is that there is less of a trough for the railways and more for the legal, insurance, financial and other services, and—as my noble friend Lord Haskel said—development teams as well. There are also tons and tons of paperwork.
The railways will survive because the people who work in them are committed. New ideas are coming in, certainly on the freight side, as many noble Lords have mentioned. Long may they continue! I believe that some good will come out of all this. In the meantime, the industry is struggling under increasing mounds of paperwork and bureaucracy as a consequence of the new structure of the industry which the Government set up.
What do we find under all that paperwork? Sadly, we find more paperwork, called safety cases. Safety on the railways is paramount. It always has been and, I hope, always will be. The whole industry is committed to safety. But effective safety is being hampered by a burgeoning bureaucracy. Over £400 million worth of rolling stock—that is not my figure; it comes from observers and members of the industry—lies idle in the sidings, sometimes for up to four years.
Perhaps I may give a few examples. The Class 92 locomotives are supposed to haul Channel Tunnel freight. It does not matter what kind of trains haul the freight. They can be diesels or electric locomotives. They are working perfectly well through the Channel Tunnel but they are a wasted national asset. They have been produced now for over two years but they cannot run except in the tunnel. They cannot run from London to Folkestone and they cannot run up the country because there is £33 million worth of work on track circuits around Redhill that has not been completed. That is nothing new. It has been known about for years. The problem is: who pays?
I have had sight of a letter from John Watts, the Minister for railways and roads. I think it was the first letter he ever wrote to British Rail. That was a year or two ago. The letter said that the Government would pay the £33 million cost. Perhaps the Minister can confirm 162 that that is still the case. If it is, why have the Government not paid Railtrack? If it is not the case, what has changed the Government's mind in the meantime? While that is going on, the locomotives sit rusting.
Post Office trains represent another exciting topic in the press at the moment. The Royal Mail is trying to put much of its mail on the railways, which is a very laudable project. It gave the go-ahead for £150 million worth of work in 1993 on terminals and trains with a hub near Willesden. The new trains are very similar to the Thameslink trains which have been around for the past eight years travelling between Bedford and Gatwick Airport. They still do not have their safety case. They are only freight trains and do not take passengers but they still need a safety case. After 15 months of attempting to satisfy Railtrack's safety assessment panel and getting nowhere, the frustration of John Roberts, the chief executive of Royal Mail, has finally boiled over. He has written to Railtrack and the Secretary of State for Transport—the President of the Board of Trade is also involved—saying that enough is enough.
Suddenly, the government penny has dropped. They have realised that the Railtrack privatisation may be in jeopardy if the Post Office trains do not get approval and provide revenue to Railtrack, which they will do if they run but not if they do not run. Do we see commercial considerations coming into play at last? There is a further threat that the Post Office could use; namely, "If you do not give us our safety case soon, we will dump the whole lot and use road and air." That is quite possible too.
Railtrack has proudly responded—this week, I believe—that driver training has started on one four-coach train on one route. Twelve-coach trains are supposed to go all over the country. So the likelihood of having them up and running by October is nil.
There has been mention of the West Anglia-Great Northern trains, which are also miles away from approval and have similar problems. But the Government or Railtrack have also twigged that if those trains could get approval, the trains from West Anglia could be cascaded to London, Tilbury and Southend and make that line more saleable. Are these commercial considerations again? I do not know.
So how does one get a successful safety case? While Railtrack is in the public sector, presumably one obtains it by complaining loudly to government Ministers, preferably at a time to give maximum embarrassment during the flotation of Railtrack. I ask the Minister whether the Government will give an assurance to all other operators waiting for safety cases—rail freight distribution, Class 365 freight wagons and much other new rolling stock—that they will make Railtrack speed up all applications to weeks rather than years. Or is the Post Office just a special embarrassment and therefore a special case? If so, why?
In short, if a delay in getting a safety case will embarrass the privatisation, there is a good chance that the safety assessment panel snail will accelerate. If not, there is a risk of being relegated to the Birmingham extra-slow snail, which is the Class 323 train. Those 163 trains trundle around Birmingham. They are very nice, but not that special. Indeed, they are quite ordinary. It has taken four years at a cost of £10 million in paperwork to get their safety case.
What will happen when Railtrack is in the private sector? Will commercial pressures speed up the process or will the insurance industry put so much fear into those who have to sign the magical safety certificate that it will get worse? It is a gamble which few will wish to take.
The franchising director recently announced that the South Eastern trains franchise would be let on the basis of new trains—as my noble friend Lord Haskel mentioned—if those were available within three years from the start date. We can forget that. It may take three or four years to build a new train, but if the 323 process is anything to go by, it will take another four years to obtain a safety case. It will be more than half-way through the 15-year franchise before our friends in north Kent ever see a new train at a cost probably of an extra £10 million just to reach to that point.
Railtrack says that since the Class 323 train received a limited area safety case, the system has been shown to be satisfactory. But what manufacturer, franchisee or operator will commit to new rolling stock if it takes four years and costs over £10 million to obtain approval? It is interesting to reflect on what would happen if a private sector rail company—passenger or freight—had £400 million worth of assets sitting around for four years due to some unspecified bureaucratic snarl-up with a government agency. I can imagine what Ed Burkhart—the chairman of Wisconsin Central which bought up most of the freight business in this country—would have to say about that. But since most of the equipment is, or was until recently, owned by us, the taxpayers, it is surely a matter for the Public Accounts Committee in another place to look into. It is a waste of a national asset. I am a beginner in this field, but it is certainly something I believe should be looked at.
It is not all Railtrack's fault by any means. All the parties—manufacturers, operators, franchisees and the rolling stock owners—have a responsibility and must accept some blame for what has been going on. But they are all trying hard to work under a system set up by the Government—who have a responsibility to make it work—to sort out the problems and knock heads together rather than pass the buck. I hope that that will happen.
What is the problem with safety? Under the 1993 Railways Act, Railtrack is responsible for the overall safety of the railways and is required to receive and approve safety cases for all new rolling stock. It set up a safety and standards directorate to set the standards and police the implementation, assisted by an independent safety assessment panel. But in many cases that independence is illusory since many of those on the panel are consultants who also advise operators on how to obtain safety approval. In my experience the one thing that consultants do is advise people to give them more work.
The problem is the way Railtrack approached the situation. It may set the standards, although in my opinion it has been slow to take over those used for 164 many years by British Rail. It seems to be unable to provide instructions about what information should be included in submissions, possibly through fear of incurring liability.
Alongside making life impossible for operators of new trains, Railtrack is also not very good at managing its own safety activities. Noble Lords have spoken of the Euston problems and the speed restrictions on the West Coast main line. Last week a north London line was closed for a long-term upgrade and all the trains were diverted through Primrose Hill. But the track failed and a freight train was stuck there for two days. Wine in one of the containers spilled all over the track; it was like a West African pillage. The track was just too old or over-used. Surely it would have been possible for Railtrack to ensure that the Primrose Hill route was satisfactory before closing the other one. It seems simple to me.
While all that is going on, the railways inspectorate, which has been responsible for the safety of our railways for years, must be looking on in bemused irritation and concern. What is the solution? If some of my remarks about Railtrack are thought to be unreasonable, they are not meant to be. I have the greatest respect for the staff, from Bob Horton downwards, who have been required by the Government to set themselves up from scratch as a company; to take over assets from British Rail which has been starved of investment for years by successive governments; and to take responsibility for overall safety and privatise themselves. I know what a strain it puts on people—perhaps that is why Roger Salmon prefers spending time in a monastery to working for the Secretary of State. That is an interesting idea.
We are talking about our national transport asset. The Government cannot be allowed to let it wither away. The safety structure was created and must be sorted out. The strong feeling in the industry, supported by David Gillan, director of the Railway Industry Association, is that the safety and standards directorate must be separate from Railtrack and must be seen to be separate. I support that view. Now that Railtrack is going into the private sector it is unacceptable for it to have any overall responsibility for safety on behalf of the industry. That would produce a conflict of interests. The separation would provide a quick and effective way of getting £400 million of rolling stock to work and is an essential part of rebuilding the confidence of the industry. I strongly urge the Government to consider seriously the separation of Railtrack and the overall responsibility for safety before it is too late.
§ 6.46 p.m.
§ Lord Teviot
My Lords, like all noble Lords I am grateful to the noble Lord, Lord Clinton-Davis, for bringing this matter before your Lordships today; though I believe it is a trifle soon. We are not yet in a position to criticise privatisation either fairly or unfairly. I strongly support the Government's endeavours and do not follow some speakers in believing that we are in a doom and gloom situation. The main objective is to get as many people travelling on the railways and as much freight carried as soon as possible. The figures showing the decline speak for themselves.
165 As other noble Lords mentioned, since 1948 £54 billion has been invested in the railways but the share of journeys has fallen from 17 per cent. in 1953 to a mere 5 per cent. today. Again, we must have confidence in the Act and the Government's power to operate it. The only point on which I am qualified to speak in this debate is that I was heavily involved in the 1985 Transport Act, which dealt with the deregulation of buses. At that time I was totally against deregulation, feeling that the regulations that were mainly put in place in 1930 were adequate, and that it was unwise for the industry to suffer the upheaval that followed. In fact, the noble Lord, Lord Carmichael of Kelvingrove, referred to me and the late Lord De La Warr as the "militant" tendency.
Apart from the Government, few people were pro the Bill. In fact, 95 per cent. of operators, whether in the public or private sector, were against it. But 10 years on I must confess that I was wrong. I was closely involved in the industry, and perhaps too closely involved. By and large the Act has been a success. More mileage is now covered; the number of passengers carried is fewer but is beginning to increase. And the financial situation, the buoyancy of the industry, has greatly improved. The structure now exists for the industry to expand.
For example, the National Bus Company was a large and not unsuccessful institution with excellent trade and very well run under the noble Lord, Lord Shepherd. It may have been too large and perhaps a little inflexible. Competition was stifled and competition is all important. The profit margins were low and one was of the opinion at that time that nobody with any sense would invest in bus services, whose sole reason for running was the public benefit and nothing more.
However, again one was wrong. There are now some very successful companies and a few have become railway operators, and good luck to them. Again, one accepted that cross-subsidy was permissible and acceptable. For example, there is a bus company in the Home Counties which made huge losses every year, but that was all right because it was counteracted and cross-subsidised by the northern companies which did very nicely. That company has been turned round. There has been sound investment in new vehicles and it is doing very well. Surely, that is a good thing.
We must have faith. As a result of the new Act fares are now being pegged. At last the rot is stopping because there had been a 22 per cent. rise in costs ahead of inflation. Surely, that will get a few people back on the trains. That is a tremendous improvement. The safeguards and the commitments which the Government have made about passenger regulation requirements all seem to be perfectly in order and successful. Through tickets and railcards remain and nothing horrible has happened.
My noble friend Lord Cadman and others mentioned the awful business of traffic congestion on motorways. Recently I had to drive from my home in Sussex to Matlock in Derbyshire. Time did not allow me to travel there by train. It is quite fast to Derby, but then there is the branch line to Matlock. I left at 5.30 a.m. and the 166 M.25. was still about possible, but when I turned onto the M.1. there was a massive tailback at 6.30 in the morning, which I gather is the norm. It was not Monday morning, but Tuesday morning and people had been working on the Monday. Whether or not one has sympathy for these people, every endeavour should be made to woo them back either onto the trains or, if possible, onto some other form of public transport or into shared cars. I cannot imagine what their performance at work is like and what their lives must be like. It must be totally intolerable because presumably they go home again in a massive tailback.
British Rail has done its best in the past, but new ideas must prevail. There must be more competition and a new approach. Over the years British Rail has become more caring and has more concern for its passengers. Let us hope that the franchise holders will continue with that and not just concentrate on the smart InterCity trains about which people have very little to complain, and consider the wretched commuter trains on which so many people have suffered. I do not know where the noble Lord, Lord Berkeley, has been, but he spoke of no new trains on the North Kent line. It is now alive with new trains including the Thames turbos.
§ Lord Berkeley
My Lords, I am very grateful to the noble Lord, Lord Teviot, for allowing me to intervene. I was referring to the Kent coast trains and not the inner London suburban trains as regards which the noble Lord is quite right. There are new trains on the inner London routes.
§ Lord Teviot
My Lords, I am glad that the noble Lord has made that point. There are new trains on the South-West lines too. I hope that when the noble Lord, Lord Clinton-Davis, reintroduces this debate this time next year, there will be some better news.
§ 6.53 p.m.
§ Lord Ewing of Kirkford
My Lords, I join all who have contributed to this debate in recording my thanks to my noble friend Lord Clinton-Davis for initiating it and for making it possible. Perhaps I may at once place on record my slight displeasure at the rather critical comments of the noble Lords, Lord Astor and Lord Harding, about the staff of British Rail trains. My experience is exactly the opposite to that described by the noble Lord, Lord Astor. The staff of whom I have had experience are certainly very helpful and very kind people. Whatever be the way in which the people of this country choose to seek to serve the public, the staff of British Rail choose to do one of the most difficult jobs that it is possible to do. Therefore, I wish to place on record my tribute to the staff.
I cannot avoid the feeling today that whatever we say will go unheard. Public opinion registered time and time again through the ballot box on the one hand, and through opinion poll material on the franchising and privatisation of our rail network system on the other, has shown clearly that the mass of public opinion is against the proposals that are now being implemented. I do not come to this debate uncritical of British Rail. I have no 167 hang ups that everything which is publicly owned is good and that everything that is privately owned is bad. I have no hang ups on that at all.
Indeed, over the years I have been heavily critical of ScotRail, for example, because there is nothing more frustrating for people travelling from east, north-east and central Scotland to Edinburgh airport than to find that the train passes the perimeter fence of Edinburgh airport. It would be the simplest of simple measures to build a rail halt and to run a shuttle service from there for the two minutes down the road to the airport. Instead, over the years British Rail has refused to build that facility and passengers are taken into the heart of Edinburgh. They then have a fair walk from the train to the airport bus and another 45-minute journey from there out to the airport. So I do not come to the debate uncritical of British Rail. I hope that, if anything, the new franchise holders of the east-coast main line—although they are not responsible for the domestic network in Scotland—will be able to bring their influence to bear so that the nonsense of passengers being taken into the heart of Edinburgh only to be brought back out again is brought to an end.
Franchising has nothing to do with improving the services. As so eloquently put by my noble friend Lady Castle, it is primarily about profits for shareholders. That is not the best motive, although it is a motive. "Profit" is not a dirty word. I do not complain about companies making profits because without profit there is no investment. But it is when profit becomes the prime function that trouble is caused. One needs to look no further than British Gas. It is now the most unpopular of all the privatised companies in this country and the water companies are rapidly following suit where profit takes precedence over service to customers.
I wish to ask the noble Viscount, Lord Goschen, one or two points in relation to Scotland. What now is the position regarding the fast rail link to the Channel Tunnel? What are the plans, because they seem to have been pushed aside? If Scotland is not to have access to the fast link it will have very serious repercussions in relation to the development of the industrial infrastructure of Scotland. What is the position of the Forth rail bridge? My noble friend Lord Clinton-Davis mentioned the fact that the Health and Safety Executive had issued Railtrack with two restriction orders, and one of them relates to the Forth rail bridge. I do not want to alarm or cause unnecessary anxiety, but the rail bridge is in a state of disrepair. It is one of our great engineering achievements. When the Minister winds up can he say what is happening in relation to the repairs that the Health and Safety Executive want carried out on the bridge before it will lift its order?
I now turn to the privatisation of Railtrack. It is noticeable that the National Westminster Bank, whose chairman is a highly respected Member of your Lordships' House, has this week advised its clients not to buy shares in Railtrack. That advice was based on NatWest's belief, which I share, that there is going to be a Labour Government. The advice went on to say that a Labour Government would take Railtrack back into public ownership. All that I can say to that is that 168 I hope that NatWest is right. I hope that a Labour Government do take Railtrack back into public ownership because that is what people want.
I am a simple chap and bring forward simple solutions to simple problems. The question that is asked is: how can you buy back Railtrack? How much will it cost? From my point of view, the answer is to say to those who buy shares in Railtrack, "You didn't give your money to a Labour Government. You gave it to a Tory Government, so you will get that money back from the Tories the next time that they are in power". It is a simple solution to what everybody seems to be presenting as an insurmountable and complicated problem.
Running side by side with NatWest's advice not to purchase shares in Railtrack was the revelation that it will cost £11 billion to put the rail network into a good state of repair. One of the promises made by the franchise holders is that they will speed up journey times. From my limited knowledge of the railways I can say with certainty that it will not be possible to speed up journey times unless the Railtrack network is put into a good state of repair. The French speeded up their journey times and were able to introduce the TGV by straightening all the bends and getting rid of all the bridges which obstructed fast-moving trains. Anyone who thinks that you can come round the Morpeth bend just outside Newcastle station any faster should take account of the incidents that have taken place over the years on that very bend. The network is riddled with such obstacles to speeding up journey times. In any case, where will that £11 billion which is to put the rail network into a good state of repair come from? It will not come from putting Railtrack into the private sector, so where will it come from?
We are told that in order to provide an incentive to encourage people to buy shares in Railtrack, a dividend will be paid in October—before it has been earned. I know Bob Horton very well. He was chairman of BP, with which I was closely involved because of my constituency interest in the petro-chemical complex at Grangemouth. I have been in the company of Bob Horton and his fellow directors at BP on a number of occasions and I can advise your Lordships that if Bob Horton had suggested at a BP board meeting that that company should pay a dividend before it had been earned, the company car would have been locked away and 10 minutes later Bob Horton would have been on the Clapham bus going home. Trying to justify the indefensible makes a professional man of Bob's standing look rather silly. It was not to his credit, but let us leave that as it is.
What is to be done? First, there must be a general election. Secondly, there must be a Labour Government. Thirdly, we must return to having the integrated rail network which the people of this country want. I am not talking about politicians now. There is no meeting place between us on some of these points. I respect those who take the opposite view from me. We can argue all day about it in this House, but the people of this country want an integrated rail network. They do not want to see incidents such as occurred last week when disabled people had to leave one train to buy another ticket and 169 then had to climb back onto the train which they had left. People do not want such things to happen, but that is what fragmenting the service leads to. The people of this country want an integrated rail system, and the incoming Labour Government will bring that about.
§ 7.5 p.m.
§ Lord Mountevans
My Lords, I declare two non-financial interests: first, as chairman of the British Rail/Railtrack best station judging panel and, secondly, as honorary secretary of the all-party West Coast Main Line Group. The former has this year given me a 10,000 mile snapshot of where the railway was as the first franchises were being let, while the latter inevitably involves me and several other Members of this House in watching a railway struggling to survive in the face of a worn-out infrastructure, worn-out rolling stock and stalled investment.
My 10,000 mile snapshot showed the former regime doing generally rather well, as its European peers (which tend to admire British Rail rather strongly) would expect, with one notable and worrying exception: the East Coast main line. To experience one train running on half power and later the same day another train failing totally was bad enough; to find the wires down two days later, with consequent two-hour delays both going north and coming back again, was even worse.
We are told that privatisation will unleash investment, but the East Coast main line has had the investment. It has had £450 million-worth of investment in the past decade. If that does not deliver—and for me it certainly it has not—it will take something other than privatisation to marshall disciplines and new management skills. It will take something much more than bullish press releases to do that.
Like other speakers, I am grateful to the noble Lord, Lord Clinton-Davis, for giving us this opportunity to debate rail privatisation. But when I started developing my thoughts, I found something of a vacuum or a grey area. Those in favour of privatisation promise us all manner of benefits; those against it stress and stress again their doubts. The former know where we are going, they believe; the latter scare us by saying that we will never get there. But I believe that as of today we really do not know the outcome. I cannot believe those who promise us the earth—any more than I can believe those who suggest that the end of the golden era of British Rail coincided either with their own retirement or, in wider terms, when their party lost either the debate or the election. I find myself in a wait-and-see situation.
While I wait and see, there are things which I believe that we can influence. I look forward to the Channel Tunnel Rail Link Bill and to making progress towards Thameslink 2000. I hope that other noble Lords will join me in fighting for accelerated progress on CrossRail. More importantly, we should push for progress on West Coast main line refurbishment. Like a photograph of the launch of the Midland main line franchise, it appears to have hit the buffers.
We need replacements on the West Coast main line because it is Britain's spinal route. We need that now—not at some indeterminate date in the future. Decisions 170 must be taken quickly on line speed and capacity. The urgency of reaching those decisions will be one of the criteria by which I, for one, will judge Railtrack and the whole privatisation concept.
That might seem unfair. There are all the users' interests to be taken into account. If, for example, the principal user, the West Coast main line train operating company, was to go for a diesel-hauled tilting train—after all, that is being tested in Canada and the United States—it would be for the franchising director to decide whether, within existing financial limits, he could agree the increased access charges which would be the price for the other 10 train operating companies which interface with West Coast main line, the five freight companies and, indeed, the European passenger services because they would have to pick up the whole tab of funding replacement of the power supply infrastructure.
Similarly, only the franchising director can decide whether the train operating companies, the users, can afford a new and as yet largely unproven radio-based signalling system. It is unproven in the sense that although it has been proven on brand new railways like the TGV in France, it has never been put to the test on a route with the traffic volumes of the West Coast main line or its intensity and complexity. Can one afford to have that as yet unproven railway signalling system? I have mentioned the 15 operators involved. It is not only the 15 operators. Almost all the traction in British Rail, apart from the third rail equipment in the South, either does or can use West Coast mainline infrastructure. It will cost a fortune to make every locomotive and trainset compatible with the new signalling system. The price to pay will be a very heavy one. I wonder whether that can be met within the budget of OPRAF, because after all he will be the principal paymaster.
Finance is one concern and technology is another. At the moment, the design of the signalling system is out to tender. I believe that installation is planned for the year 2000. It is interesting that the two largest railway companies in the world, Burlington Northern Santa Fe and Union Pacific in the United States, are pursuing the same concept but with a much slower implementation schedule and specific review points. "Are we going down the right route? If not, let us not waste any money going any further". If those truly great and successful railways—which are great and successful because they have the commercial skills and judgment which are such a pillar of privatisation—are deliberately making slow progress why we are rushing along at the projected rate?
Another factor that we can try to influence, as mentioned by several noble Lords earlier in the debate, is the switch of freight from road to rail. I welcome the inquiry by the Select Committee of another place into the adequacy and enforcement of regulations covering coaches and lorries. We know that rail loses freight because road hauliers can cut corners and thus costs. There is a much looser safety regime on the road side of the business than there is, or ever has been, on the railways. One only has to read reports of recent police roadside checks to appreciate the volume of tachograph, overloading and vehicle faults, which are far too 171 frequent. Given the safety regime imposed on the railways—the noble Lord, Lord Berkeley, almost said "over-imposed on the railways"—surely we should look for a level playing field for both, especially in respect of the road transport industry.
I turn to an ongoing concern: bridge bashing. Last year there were 1,100 strikes, a 56 per cent. increase on 1992. Yesterday, there were six instances, delaying or cancelling 65 trains and giving the worst annualised rate of over 2,200 instances per year. When I last raised this matter it tended to be a problem of a lorry hitting a bridge and the driver, having passed three signs indicating the bridge height, saying that he did not realise how high his load was. Much worse than that, since the matter was last raised the Glasgow tragedy occurred. I am sure that that tragedy will be remembered by the noble Lords, Lord Ewing of Kirkford and Lord Carmichael of Kelvingrove (for whom it is very close to home). As I recall, seven adults and children were killed when a double-decker bus hit a railway bridge. The disaster that we had awaited happened, yet the department remained singularly unconcerned. When shall we see action, and what action shall we see?
Many of your Lordships will remember that some 12 years ago I argued for what I christened a big bang privatisation, that is, privatisation of the railways as an entity. I still wish that the big bang had been the chosen route. That sentiment and wish was reinforced by a recent visit to the United States, in particular to Burlington Northern Santa Fe, the world's largest private enterprise railway. That company tried to headhunt a very senior executive of British Rail. It had discussions with Stagecoach because it saw opportunities in franchises. But it pulled out when it realised that the Railtrack concept gave it no control over the infrastructure. Once that was clear it decided to give franchises a miss and to look for investment in suburban railways in South America. As we fragment, Burlington Northern Santa Fe is consolidating and centralising. When we talk of West Coast mainline signalling we are thinking perhaps of 450 route miles run from one signal box. That company is already operating 30,000 miles of railway from one room the size of the main auditorium in the Queen Elizabeth II Centre. As we go into leasing that company is pulling out of it because it believes it is not capital effective. That company has had 15 to 20 years' experience of the leasing concept. As we rush forward—as with the West Coast mainline signalling project—that company makes slower but deliberate progress. In every respect I believe that we can learn from that company's commercial judgment.
§ 7.16 p.m.
§ Lord Carmichael of Kelvingrove
My Lords, I always find railway debates rather interesting. There is something fundamental about them. The railways are a link with so much of our history, literature, social life and memories of early holidays. Over the past half-century some unbelievable changes have taken place in transport. I refer to the sheer convenience of the motor car, although for the city dweller it is a diminishing convenience. In most of our cities the motor 172 car becomes a serious problem. When one gets to one's destination one wonders what to do with the car. The availability of parking in city centres is not unlimited.
As a Glasgow man who occasionally needs to go to Edinburgh, the train is the only way. The journey time is 50 minutes with a service of one every 30 minutes. I understand that there was an intention to increase the service to 15 minutes. My noble friend Lord Berkeley and the noble Lord, Lord Mountevans, will recall that the Class 158 DMUs were brought in which made the journey from Glasgow to Edinburgh in 50 minutes. The intention was to reduce the service from every half an hour to 15 minutes, which would have been perfect. It would have taken a great number of cars out of the city centres. However, the engines and units had teething problems and, coupled with the start of the recession, that ambitious scheme was abandoned, but let us hope that it is not too late. It was a pity that it did not work. Looking at it in retrospect, in years to come it might well be said that a first-class rail service between two big cities 40 miles apart could have been an example worthy of study. That experience could have been extended to many other areas and cities. If we do not try bold experiments, our towns and cities will become more and more uninhabitable.
Government attitude to road and rail has always been very lopsided. In another place the Minister for Railways and Roads gave a reply to my honourable friend Mr. Jim Cunningham. He asked the Minister about the proportion of research money devoted to rail and road by the Ministry of Transport. The proportion was 88 per cent. to road and 5 per cent. to railways. Why does road not carry more of the burden when rail has to carry so much? I am not one to decry the motor car; but one of the points that we must remember when we talk about the railways and road traffic is that the roads are carried on the backs of 22 million motorists who pay for their licences, whereas the railways are freestanding and the passengers must pay when they use them.
In another answer on the same day, the Minister told another of my honourable friends in another place that a certain number of fares on the railways would be regulated by the franchising director. That was good news. But when one looks at the matter closely one sees that there will be a number of uncontrolled ticket prices. The prices will be decided by the operator and not the franchising director. The Minister listed the tickets which would be free of any control. They include all first class fares, APEX fares, super APEX fares, network awaybreaks, super advance tickets, cheap day returns, special day returns, shuttle advance tickets, voyagers—I do not know what those are!—and rover tickets. Some prices will be controlled, but the list I have read leaves lots of room for increases.
That brings us to the big question of costs. The rail regulator will decide the level of charges for access to the track. The majority of Railtrack's income will come from that source; and, to quote the regulator:Railtrack's performance in the efficient and effective operation, maintenance and renewal of the rail network is critical to the future success of the rail industry".173 What figure will the regulator use? What figure will he be given by Railtrack for its maintenance and rail costs? We must remember that the railways have been starved of investment for a long time, which is why we have problems. The only big investment that I can think of in the past 28 years was the East Coast main line. As the noble Lord, Lord Mountevans, said, the quicker we get on with the West Coast main line, the better it will be. The railways have been starved of funds and investment. The Daily Telegraph—a newspaper about which noble Lords opposite will be reassured—of 29th April disclosed some figures which came into its possession. They are based on the BR Rail Civil Engineering Design Group based in York. The report looked at three representative groups and extrapolated them to the network to build up a national overview of the costs that Railtrack will need to pay. It estimated that the cost of maintaining bridges, tunnels and sea defences would be £10.63 billion. Another £324 million was assessed as being needed to maintain the condition of the general structural inheritance. Thus, its total cost came to £10.96 billion, which is way below the £1.39 billion set aside for that purpose in the Railtrack prospectus.
The Minister must be aware of those studies, and if I am seriously wrong, I am sure that he will have the correct figure to give to the House when he winds up.
Noble Lords will want to know how we on this side of the House look at the future of our vital railway industry. My noble friend Lord Clinton-Davis made a powerful speech, and gave a full answer to that question. The shadow Minister of Transport in another place made clear in her speech on 17th April in another place:That we [the next Labour Government] are interested in mobilising public-private partnerships … in order to secure more investment in the rail network. That is occurring in other countries, and it should happen here also".—[Official Report Commons, 17/4/96; col. 722.]That is the future not just for rail but for transport generally.
This step towards privatisation, especially Railtrack, is a privatisation too far. I was impressed by the remarkable speech made by my noble friend Lady Castle, to whom I pay a great tribute. I came to transport as one of her young, raw people when she was introducing the 1968 Act. That Act was an exceptional Act. It may have gone further than we were ready for at the time. It did so much, that we shall never be able to undo it all, despite what this Government do.
The noble Lord, Lord Astor, spoke about money coming in from private sources. He must realise that in all the privatisations, the shareholders have been bought off. I quote from the Independent—
§ Lord Carmichael of Kelvingrove
My Lords, surely the Independent is not a proscribed newspaper in this House. The reference is:Fattened for market: The price of disposal".174 It gives figures for British Steel, British Aerospace, the National Freight Corporation and others. It gives about 10 privatisations. The amount written off in present day prices totals £22 billion.
§ Lord Carmichael of Kelvingrove
My Lords, £22 billion. The same will happen with rail. Sir Edward Heath, who has always been a moderate understanding man, said this was a privatisation too far. That is something with which we all agree. The public may not know all the details, but in their bones they think that privatisation has gone too far. This is one that they will not stand. It will be another way by which we shall gain power whenever the Government decide to call an election.
§ 7.28 p.m.
§ Viscount Goschen
My Lords, I thank all noble Lords from all parts of the House who have spoken in today's fascinating debate, as ever, on the railways. I owe my particular thanks to the noble Lord, Lord Clinton-Davis, for choosing the subject of today's debate. I do not believe that there is a subject on Government policies which I would rather debate with noble Lords than the benefits of privatisation to the travelling public and the benefits in terms of encouraging freight onto the railways.
The debate is largely and rightly about passengers, which is what is specified in the Motion. So I was somewhat surprised that the noble Lord, Lord Clinton-Davis, did not largely talk about passengers but concentrated upon the timely, yes, and important, I would certainly agree, subject of the Railtrack privatisation. I hope to deal with some of the points that the noble Lord made on that, at times, technical issue.
The debate reinforces my conviction that privatisation is the only policy which will arrest the long-term decline of the rail industry. It is the only policy which provides the industry with a direct incentive to compete with other modes. It introduces new ideas, skills and resources and produces a sharper focus on the needs of the customers. Last month my right honourable friend the Secretary of State for Transport published a comprehensive statement on transport policy entitled Transport: The Way Forward. I was pleased that the noble Baroness, Lady Castle, and the noble Lord, Lord Berkeley, referred to it and welcomed it.
The noble Baroness wanted to see decisive policies. I do not believe that she has found any coming from the Bench in front of her but she has found one coming from the Benches directly opposite her. The railway privatisation is the biggest shake up, the biggest structural change, in the railways for a long time. It was a key policy in the manifesto of the Conservative Party on which the electorate voted and wisely kept the party opposite out of office for some 17 years.
Perhaps it might be worthwhile to look at the effects of nationalisation of the railways before we consider the effects of privatisation. Between 1953 and the mid-1990s the railway industry's share of the passenger 175 transport market shrank from 17 per cent. to just 5 per cent. Its share of the freight market dropped even more dramatically. Successive governments came to power with warm words and good intentions. They wanted to effect a shift from road to rail. But the fact is that year after year the railways lost ground. We must face the issues and ask ourselves why.
The era of state ownership was marked by poor industrial relations, low productivity, rising fares and a poor public profile. It was often said that the British public loved the railways but resented British Rail. As my noble friend Lord Astor rightly said, the old railway was a monolithic, monopolistic nationalised industry which never had the opportunity or the incentive to focus on the needs of its customers. It was insulated from the commercial pressures of private ownership and its command structure was not geared to the needs of customers.
Despite the almost unique admiration of the noble Lord, Lord Ewing of Kirkford, for the standards of service put forward by the old British Rail there has been a problem with the motivation of staff. Almost anyone involved with the railways will appreciate that point. The basic problem with the railways was structural and not financial. The Railways Act addressed those structural deficiencies for the first time and the benefits of that bold initiative are becoming more and more apparent with every passing week.
Privatisation is a reality. Over half the rail industry—worth more than £4 billion by aggregate turnover—has now been transferred to the private sector. We have sold the three rolling stock leasing companies and most of the domestic freight and parcels businesses. We have sold six of the infrastructure maintenance units, four of the track renewals companies and a large number of other former BR businesses, including BR telecommunications. In addition, 80 per cent. of the passenger railway by revenue has either been sold or is on the market and almost one-third of the passenger railway by revenue is now in private hands. Six franchises have been awarded and five are already running services. LTS is being retendered. Prequalification has been completed and bids invited for a further five and the prequalification process is under way for a further eight. Overall, some 53 former BR businesses are now in the private sector. Privatisation has acquired an irresistible momentum.
The latest example of the ongoing privatisation process is the flotation of Railtrack. Your Lordships will know that on 1st May the prospectus for the sale was published, starting the final leg of the journey to transfer the owner of the national rail network to the private sector. The noble Lord, Lord Clinton-Davis, felt that insufficient information was available and complained that he had not received a copy of the prospectus until recently. If your Lordships feel that that has been the case I apologise for not providing the House with the information at an earlier stage. On the basis of the indicative price range, that gives the market capitalisation of between £1.75 billion and £1.95 billion. Expressions of interest from small UK shareholders are encouraging with around 1.9 million potential investors having registered their interest with share shops by the closing date.
176 The noble Lord, Lord Clinton-Davis, claimed that the prospectus was misleading. I entirely reject that suggestion. It went through an exhaustive process of verification and to the best knowledge and belief of the Railtrack directors and the Secretary of State for Transport it contained all the relevant material information and no material omissions.
The noble Lords, Lord Clinton-Davis and Lord Carmichael of Kelvingrove, questioned the issue of Railtrack and the expenditure required to maintain and renew its infrastructure. They believe that that had been underestimated. I understand that CEDG was commissioned to inform the directors of Railtrack as to the expected future costs of maintaining and renewing certain of its assets. CEDG's report to Railtrack was produced over a short time-scale, was based on an extrapolation of a small sample and used less sophisticated and analytical techniques than those subsequently used by W. S. Atkins. It was based on assumptions about asset lives which were not in accordance with prudent management of the assets concerned. Its cost estimates were inconsistent with historical spend in that area. The report was rejected by Railtrack. Having regard to the matters above and the superseding works of W. S. Atkins, its contents were not regarded as material or appropriate information for inclusion in the Railtrack prospectus. I hope that that covers the particular matter.
We are already seeing the successes of our rail privatisation programme elsewhere. Take the franchising of passenger services. For the first time key services are contractually safeguarded in franchise agreements. It is worth reflecting that all six of the franchises awarded so far will maintain the same levels of service as were previously operated by BR. In a number of cases franchisees will be adding new services to the timetable to fill gaps in the market which BR had not previously spotted. I believe that that is in direct contradiction with the scare stories put around before we reached that stage in the privatisation process. Take Midland Main Line as an example. On MML, National Express will run an extra half-hourly weekday service between St. Pancras and Loughborough; or London and south coast providing new off peak and Sunday services for south London; or Stagecoach doubling services between Southampton and Salisbury. Franchising means rail services are safeguarded and improved.
Key "network benefits"—such as through-ticketing and discount cards for the elderly and the disabled—are contractually safeguarded under rail privatisation. Indeed, these benefits are being legally safeguarded for the first time as a direct result of rail privatisation. The rail regulator has been set up to act as an independent defender of passengers' rights and the Railways Act gives him far-reaching powers to intervene if those rights are ever threatened. Franchising takes customer benefits, which might have been eroded under the old nationalised industry regime, and gives them an explicit legal foundation.
Tonight we have heard criticisms of not caring for the railway as a whole and of fragmenting the railway. I do not believe that the criticism is rightly placed. We have certainly split up the railway into new, smaller, more 177 focused companies better able to meet the needs of their customers. But we have preserved the essence of the railway network so that, as far as passengers are concerned, their journeys across the country should, as far as possible, be no less convenient than under British Rail. And while there will be some competition and rivalry between franchisees, there will also be extensive co-operation so that trains continue to connect with each other and through tickets continue to be available. It is clearly in private-sector operators' interests to make it easier not more difficult for passengers to use their trains. That way they will attract more customers and increase their revenue.
Those fundamental points were missed when a little while ago we had all the scares about the loss of network benefits and so forth. It is clearly in the companies' commercial interests to address even the hideous spectre of the commercial interest raised by the noble Lord, Lord Ewing. It is clearly in their commercial interest to keep such arrangements going and working well.
§ Lord Methuen
My Lords, I was informed by Derby station personnel that there is no connection between Regional Railways and Midland Main Line and that there is no interest in maintaining the connections. Would the Minister care to comment on that?
§ Viscount Goschen
My Lords, I am interested to look at any specific details which the noble Lord wishes to bring to my attention. I shall take up the point which he raises. But the senior people from all the franchising companies involved in the process realise fully the real benefits available. It is like asking what on earth would be the commercial advantage of making sure that someone misses his next bus or cannot buy a ticket. Those benefits are to be found on all other transport modes and the idea that it will not happen in relation to the railways is frankly absurd.
The critics were wrong to suppose that franchising would mean less investment. Franchisers have come forward with impressive plans for investing in new rolling stock. In particular, the users of the services in Kent run by South Eastern Trains have been clamouring for investment. There is now the prospect of new rolling stock. National Express, the winners of the Gatwick and Midland Main Line franchises, is committed to replacing the Gatwick Express stock and investing in additional trains for the Midland Main Line to provide significantly improved services between London and the Midlands. Even those franchisees who do not need new rolling stock are in many cases planning to refurbish and improve existing trains.
Franchisers are committed to improving services for passengers. Certainly the voice of the consumer, the passenger, has been heard. My noble friend Lord Harding described the improvements to the services in the West Country under privatisation and indeed in the lead-up to privatisation. I welcome that up-to-date information.
In the South-West, Stagecoach has introduced co-ordinated bus links to railway stations with feeder services from Romsey to Winchester and Bordon to Liphook. It is investing £3 million in station 178 improvements, including better security, lighting and information. Great Western Holdings is doubling the amount of compensation available to passengers when trains are delayed and is looking at introducing motorail services to the West Country.
For the inter-city East Coast services, Sea Containers is investing £17 million in service enhancement, including improvements to the rolling stock and stations. I could go on, but in the interests of time I believe that those few examples will suffice.
All franchisees are committed to improving passengers' charters, some with significantly higher punctuality and reliability targets than were set by the old BR services.
The next important issue is fares. I was extremely surprised to hear the somewhat half-empty glass of whisky argument put forward by the noble Lord, Lord Carmichael, on the issue of safeguarding fares. For the first time ever, those key fares have been safeguarded; that is, key fares for commuters and also key leisure fares. I was interested to hear the noble Lord, Lord Carmichael, safeguarding in his own thoughts the interests of the first-class passenger. We are concerned to give maximum commercial freedom while at the same time protecting those key fares. That is what has been done. That announcement has been welcomed widely throughout the country.
§ Lord Carmichael of Kelvingrove
My Lords, I wonder what will happen if the names of the services are changed. Will the regulator need to intervene? There is a feeling that there are so many exceptions that the privatised rail companies will be able to do as they like.
§ Viscount Goschen
My Lords, they certainly cannot do as they like. The main key fares have been capped and have been linked to an RPI formula. There is no getting away from that. Nationalisation has given rise to steadily increasing fares. Privatisation is giving the consumer, the passenger, a better and more reliable service with capped fares.
I turn now to the interests of the taxpayer. A cheaper and better railway will benefit the taxpayer as much as it will benefit the travelling public, although in so many cases, it is one and the same. BR required financial support of £326 million in 1995–96 to run the six franchises awarded so far. The new private sector franchisees will require support of only £269 million to run the same services this year. In seven years' time, they will need less than £100 million per year. By any standards, there can be no argument with those figures. Franchising means a better deal for the taxpayer.
The noble Lord, Lord Berkeley, and my noble friend Lord Mountevans referred to the issue of safety. I assure the House that safety has been of paramount importance in the privatisation process. That has always been so in relation to the railway and always will be. The HSE's independent advice on the new safety regime was implemented fully by the Government. The HSE has confirmed that there is no evidence of any overall decline in health and safety standards. Indeed, there is 179 no complacency. The HSE will continue in its independent monitoring and enforcement to ensure that standards are maintained and commitments are met.
The noble Lord, Lord Berkeley, raised the issue of the responsibility for demonstrating safe operation. That rests with the vehicle manufacturer and owner. However, Railtrack recognises that the present processes for accepting new trains need improving. I certainly welcome the remarks made by the noble Lord, Lord Berkeley, at the end of his speech when he said that he might be interpreted to be over-critical of Railtrack. For me, that was a good argument in favour of the private sector. But we all put a different interpretation on the words which fall from noble Lords' lips.
I should like to mention briefly the Channel Tunnel Rail Link. That is a major project which will bring substantial benefits. We welcome that. We welcome the consideration of the Bill in this House and I look forward to the contributions which noble Lords will make.
Those are the hard facts of privatisation so far. A sea change in the culture of the railway industry is under way. So far, I have dealt mainly with aspects of the passenger railway, but I believe that they are true also in relation to freight. It is no secret that the railway's share of the freight has been in decline for several decades. While 42 per cent. of goods in Britain were moved by rail in 1952, that figure is now barely 6 per cent. That is a trend which can be seen throughout Europe in the face of the flexibility and cost advantages offered by road haulage.
Noble Lords will be aware that many of BR's operations in that sector have already been transferred to private ownership. Its parcels carrier, Red Star, became Omega in September and mail train operator Rail Express Systems was sold to North and South Railways in December. The three bulk-freight Trainload Freight Companies were also sold to North and South Railways in February. In addition, final bids have been received for the domestic and deep-sea container business, Freightliner, and BR and the Government are examining the options for privatising Railfreight Distribution, principally concerned with international services through the Channel Tunnel.
We certainly wish to see a revival of domestic freight haulage by rail in Britain. We have taken the necessary steps to create the environment in which that can happen. Free from the restrictions of state ownership, freight-operating companies will be better placed to replace the long-term loss of traffic to road haulage and to pursue innovative, customer-oriented strategies. I believe that a clear example is North and South Railways, a consortium led by the US railroad operator Wisconsin Central Transportation. That has a wealth of experience from its operations around the world which it will bring to bear.
As I said at the beginning of my response, I welcome the opportunity to set the record straight on rail privatisation. I certainly welcome the opportunity to discuss the very important issue of freight on the railways. Indeed, there is a great deal more that could 180 be said, but we are slightly constrained by time. Suffice it to say that we have moved the rail freight businesses into the private sector. We believe that that is where they can flourish. All our policies are dedicated to ensuring that rail is given the best chance possible to win its proper share of the freight market.
As I said, I have welcomed the opportunity to demonstrate once again that our policies are delivering a better deal for passengers and for taxpayers. As each week goes by and we see more businesses pass into the private sector and more advantages coming from those actual operations, I believe that that fact will come very clearly across to the travelling public and, indeed, perhaps to noble Lords opposite.
Today's debate has been about what passengers want. They want good levels of service, and they have been provided with that. They want affordable fares, and now the key fares are capped. But, above all, I would say that they want a better quality of service; and, of course, that has also been provided. The privatisation initiative has already changed attitudes which have moved away from the old producer-led way of running a railway towards putting the consumer first. I really believe that there is a strong contrast between this and the old railway.
To sum up the position, we have had a wide-ranging attack from noble Lords opposite. I hope, therefore, that those noble Lords will not consider it an insult if I say that we have heard some very good old Labour speeches. We have heard attacks on the principle of privatisation expressed with the feeling that public operators provide a better service. However, my mind slips back to a quote from a Member of the Labour Front Bench in the other place who described British Airways as being the "pantomime horse" of privatisation. I hope that that sort of remark will be consigned to the museum of old Labour, along with a number of the speeches that we have heard this evening.
Finally—and I know that I have spoken for some considerable time—I should say that I shall read the Hansard report tomorrow morning extremely carefully in order to check the remarks made by the noble Lord, Lord Ewing of Kirkford—an official spokesman of the Official Opposition in your Lordships' House—regarding the importance which he attaches to the principles of private ownership. Having said that, I hope that I have been able to answer all of the points that have been made this evening.
§ Lord Haskel
My Lords, before the Minister sits down, will he please confirm that, where he uses the word "plans" about various franchises, there is no obligation on that franchisee to invest in new rolling stock?
§ Viscount Goschen
My Lords, it depends on the basis upon which the franchise has been awarded. Indeed, in some of the new franchises, the Franchising Director has stated that they have been awarded on the basis of there being a certain commitment as regards new rolling stock. However, in other cases, the new franchise operator has made commitments to certain levels of investment. He is committed to the level of 181 service but has also said that he will put services on top of that. It all depends on the detail of the franchise agreement between the Franchising Director and the rail operating company.
§ 7.53 p.m.
§ Lord Clinton-Davis
My Lords, I should like to thank all speakers who contributed to our interesting debate. We have heard some outstanding speeches. Perhaps I may congratulate my noble friends Lord Haskel, Lord Berkeley, Lord Ewing and, indeed, my noble friend Lord Carmichael of Kelvingrove for their speeches. However, if one were to give a "man-of-the-match" award, I believe that it would have to be awarded to a woman on this occasion. Indeed, it would be my noble friend Lady Castle who spoke not only with great experience as a former Minister of Transport—and an outstanding one at that—but also with wit and penetrating good sense. Long may my noble friend be able to make such contributions to our debates in this House.
This Government really have illusions or delusions of adequacy. Indeed, that was reflected with great charm by the Minister who has just responded and for whom I have great admiration. The noble Viscount maintains an ability to whistle in the dark to keep up his spirits. However, he lives in a fanciful world of assertion and of hope. I do not disagree with him as regards living in a world of hope, but he is going to be disappointed.
In relation to the railways, the Minister and his colleagues have revealed in this House, elsewhere and in the other place a vivid example of what is tantamount to a scorched-earth policy. It will not fall to them to rebuild. They are on the way out: new Labour is on the way in. Having said that, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.