Orders of the Day — British Railways (Compensation)

– in the House of Commons at 12:00 am on 17 February 1977.

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10.16 p.m.

Photo of John Horam John Horam , Gateshead West

I beg to move, That the British Railways Board (Increase of Compensation Limit) Order 1977, a draft of which was laid before this House on 25th January 1977, be approved. The purpose of the order is straightforward and simple. It is to release the second tranche of compensation which the Secretary of State may pay to the British Railways Board for the operation of its passenger railway system. Under Section 3 of the Railways Act 1974, the amount of compensation is limited in the first instance to £900 million, but it Provides for that limit to be increased to £1,500 million by Order in Council subject to approval by resolution of this House. This is accordingly the order envisaged by the 1974 Act.

It may help hon. Members if I remind them briefly of the pattern of Government support for the railways system and explain how these limits of £900 million and £1,500 million apply. The Government support the railways in four different ways. They pay compensation for the operation of the rail passenger system; they pay half of the costs of level crossings on public highways; they make payments towards meeting the inherited pensions liabilities of the Railways Board; and they pay interim support for the rail freight business, which hon. Members are considering in the context of the Transport (Financial Provisions) Bill. In addition, of course, local authorities— mainly the metropolitan counties in England and Strathclyde in Scotland—make payments to British Rail, through their Passenger Transport Executives, for rail passenger services to meet local needs. It is only the first of these—Compensation for the operation of the rail passenger system—that concerns us now.

Hon. Members will recall that the Railways Act 1974 introduced a new system of support for the passenger railway. Section 3 of the Act enables the Secretary of State, as the competent authority in Great Britain, to impose a general obligation on the Railways Board, under EEC Regulation 1191 of 1969, to operate its rail passenger system. This regulation is designed to prevent distortion of competition between railways and other modes of transport, both within and between member States. When we became members of the Community, the regulation became applicable to this country, and the provisions of the 1974 Act reflect this. The same regulation requires the Secretary of State to compensate the Railways Board for the net cost of carrying out the obligation thereby imposed.

It fell to my right hon. Friend the Member for Sheffield, Park (Mr. Mulley) the then Minister for Transport, to consider the nature of the public service obligation which should be imposed on the British Railways Board. The House will recall that, if there is any objection to the closure of a rail passenger service, it cannot be withdrawn by the Railways Board without the specific consent of the Secretary of State after going through the prescribed statutory processes. It was not, therefore, necessary to specify in detail which services should be provided. My right hon. Friend also concluded that it would be impractical to specify precisely such matters of railway operation as the frequency with which services should be run or the quality of service that should be provided. He therefore gave the following general direction: that the British Railways Board shall operate its railway passenger system so as to Provide a public service … which is comparable generally with that provided by the board at present."—[Official Report, 19th December 1974; Vol. 883, c. 607.] That was in December 1974. From 1st January 1975, Clause 39 of the 1968 Transport Act, under which the Secretary of State made grants to the Board for individual unremunerative passenger services, ceased to have effect, and instead the Board was required to make a claim for an annual grant of compensation for carrying out the obligation that had been imposed on it.

When the 1974 Railways Bill was published the Government estimated that the compensation needed would average about £300 million per year. It was hoped that the £1,500 million provided in the Bill would last for five years, but it was thought prudent to allow the House to have the opportunity of deciding, after the first £900 million had been paid, whether the further £600 million should then be made available to the Board.

In the first year of the new system, 1975, the payment to the Board was just short of the £300 million. On 30th June 1975 my right hon. Friend the then Secretary of State for the Environment, announced that the Board would be expected to contain its requirements for passenger support in 1976 within the 1975 level in real terms. After allowing for the effect of inflation, that set a ceiling of £335 million. The Board's claim for compensation for that year, 1975, which is still subject to some adjustments, although I expect those to be very small, was for £312 million, well within the ceiling—and in real terms well within £300 million at 1974 money values.

For 1977 the Board has again been told that it will be expected to keep its requirement for support within a cash ceiling. But, as my right hon. Friend the Secretary of State for Transport announced on 15th December, this year's support ceiling will be reduced. It would have been based on the standstill level set out in last year's public expenditure White Paper, Cmnd 6393; that is, the same as for 1975 and 1976 in real terms. But on 15th December, following my right hon. Friend the Chancellor of the Exchequer's statement on reductions in public expenditure, my right hon. Friend announced a £15 million reduction in current cash terms in payments to British Rail for 1977, of which most must fall on the passenger system. The ceiling this year will thus be £375 million—equivalent to £292 million at 1975 money values. I am happy to say that the Board's provisional claim for compensation is within that figure, and the Board has shown a good record in keeping within the ceiling.

However, as we can see, although not increasing in real terms, the claims for compensation have been increasing in money terms because of the rate of inflation. It will be evident to hon. Members from the figures I have just given that the total amount of support for passenger operation paid since 1974 is likely during the course of this year to exceed the £900 million provided by Parliament. So we come now to the point, envisaged when the 1974 Act was passed, when we must seek this House's approval to the extension of the limit of compensation to £1,500 million as provided for in section 3 of the Act.

I have spoken of the amounts of compensation paid to British Rail in some detail, because I think it is important that the House should be aware of the success that the Chairman of the Board, his predecessor and their colleagues have had in keeping to the financial targets set them by the Government. I suggest to the House that the figures show, too, that the Government themselves have been able to control the amount of support for the rail passenger system, and that the Act continues to provide a generally satisfactory legislative framework for a good working relationship between the Government and British Rail.

But £300 million a year or more in current prices is a great deal of money for taxpayers at large to go on paying each year in subsidy. The money has been spent, of course, in support of the 700 million passenger journeys made each year by rail, for the subsidy relates to the entire passenger railway and not to parts of it.

Photo of Mr Norman Fowler Mr Norman Fowler , Sutton Coldfield

I apologise for interrupting the flow of the Minister's speech. He is seeking permission to spend an extra £600 million. How long precisely does he expect that £600 million to last?

Photo of John Horam John Horam , Gateshead West

As I have pointed out, the Board has more than met its obligations under the Act. In real terms it has spent less than the £300 million each year which was provided for under the 1974 Act. I would therefore think that the extra £600 million would last a full two years more. It is quite remarkable; few Governments have achieved that degree of accuracy in their forecasting, and it is a credit to the British Railways Board.

The previous Administration carried out a review of rail policy in 1973. This review concluded that no viable passenger railway network could be identified. The House accepted this view when it debated the 1974 Railways Bill. It agreed that if we wanted a passenger railway system we had to subsidise it. Nothing has happened since then which would lead the Government to take a different view.

Photo of Mr Ronald Atkins Mr Ronald Atkins , Preston North

Is my hon. Friend aware that, although the West German Government grant £2,500 million a year subsidy to the German railways, in the last year the German railways are still showing a deficit even after receiving that subsidy?

Photo of John Horam John Horam , Gateshead West

In this respect it seems that we have actually out-performed the Germans. It is a credit to the British Railways Board. I am grateful to my hon. Friend, who is a mine of information on these matters.

In paying compensation to the Board, we require it to calculate its costs and its earnings for the passenger system as a whole. The difference, very broadly, is the amount of compensation.

Hon. Members may ask: where, then, are the incentives to the chairman and his colleagues to minimise their claim for Government support? There are two. Firstly, we are not paying an open-ended deficit subsidy. The claim for support is derived from the Board's management budget and settled early in each year for payment by instalments during that year. There is only limited scope for adjustment thereafter, to allow for previously defined circumstances outside the Board's control such as the effects of changes in taxation. Having budgeted to allow for a certain amount of Government support, within a ceiling, the Board must manage within its budget.

Secondly, there is a cash ceiling on the amount of compensation. Given that the size of the system, and the broad level and quality of service, is determined by the public service obligation laid upon the Board, there is a powerful incentive to all railwaymen to reduce costs by increasing efficiency and productivity.

Photo of Mr Roderick MacFarquhar Mr Roderick MacFarquhar , Belper

Does my hon. Friend also agree that there is a powerful obligation on the Board to perform that public services? In view of the correspondence that we have had on the subject of what the British Railways Board intends to do in my part of the country, will he impress on the Board that when hon. Members on this side of the House support the additional money we expect the Board to pay considerable attention to representations on behalf of constituents who will be cut off from rail transport if the plans go ahead in the East Midlands?

Photo of John Horam John Horam , Gateshead West

I am well aware of my hon. Friend's assiduity in pursuing the transport needs of his constituents. He has not only written to me about speed limits and rural buses but has also been in correspondence about particular rural services which may be withdrawn. I well understand my hon. Friend's concern. In the first instance this is a matter for the British Railways Board, although any closure has to come to the Secretary of State before it can go through.

Anyone who looks at the continued downward trend of railway manpower will see evidence of that increased efficiency. It is to the great credit of the unions as well as management that that has been achieved so harmoniously.

In closing, I would like to quote what my right hon. Friend said in the debate on the Second Reading of the Railways Bill: I do not claim that the arrangements will turn out to be perfect or, indeed, provide a lasting solution to the perennial railway problem, but I do justifiably claim that the support being provided gives the railways a better deal than they ever had in the past … and gives the community a fair return in social and environmental terms for the financial support they must have to remain in existence".—[Official Report, 24th June 1974; Vol. 875, Col. 1014.] I suggest that the arrangements have stood the test of two hard years remarkably well and provide a sound framework for developing the relationship between Government and the railways in the near future. I am confident that the House will endorse that view and agree that the limit on compensation payable to the Board for the passenger system should be increased from £900 million to £1,500 million to allow us to continue that development through to 1979.

10.30 p.m.

Photo of Mr Norman Fowler Mr Norman Fowler , Sutton Coldfield

It is a curious feature of our procedures in this House that we often spend a whole day debating Government proposals for the expenditure of £10 million or £15 million, yet here we have a measure envisaging expenditure of £600 million and we are allowed only one and a half hours after 10 o'clock to debate it. Even this is an improvement on the Government's original intention, which was that it should be taken in Standing Committee and not on the Floor of the House at all. Apparently, the order, with all its implications for railway policy, does not merit the intervention, let alone the presence, of the Secretary of State for Transport. I say that because I suggest that the very need for this debate reveals a position which cannot fail to be of concern to hon. Members on both sides of the House.

The draft order comes before us as a direct result of the Railways Act 1974. That became law at the end of 1974. The Act made grants available to British Railways to a total of £900 million and provided that, when that amount was used up, the Government could come back to the House to seek permission to make available a further £600 million, which is what the Government are doing now.

British Railways will have used up the first grant of £900 million in the next few months. The chances are that the next £600 million will have been used up by 1979. Thus, the position is that British Railways will have gone through £1,500 million in less than five years. But that is not the sum total of the support going to the railways. In addition, there is the freight deficit, there are the pension liabilities, and there is the amount provided for investment. So, by any measure, we are discussing massive sums.

Yet even that is not the full story. As the railway subsidy has increased—and I thought that the Minister might have mentioned this—so, too, have railway fares. Over the past two years fares have doubled, hitting hardest the commuter who must use the railway to get to work. The Government seem to regard commuters as the affluent middle class. I suggest that that is an absurd generalisation and that most commuters have moved out of London for one major reason, which is cheaper housing.

What is more, rural passengers generally and commuters in particular have been hit hard and hit twice. As passengers they have been hit by increased fares. As taxpayers they have been hit by increased taxes.

Although the Opposition do not intend to divide the House on the order, it would be a grave mistake for either the Government or British Railways to believe that we are satisfied with the position as it stands today. We should remember just how quickly it has deteriorated since the House debated the Railways Bill, and, frankly, we are not prepared to accept the implication in a number of the Minister's remarks that the railways have achieved some great triumphs over the past few years.

When the House debated the Railways Bill, right hon. and hon. Members had before them the 1972 Annual Report of the British Railways Board. At that time, grants were being made by the Government and, to a much lesser extent, by passenger transport executives for the operation of specific unremunerative passenger services. In 1972 those grants totalled £68 million. In 1975 the position was that the passenger deficit as recorded in British Rail's accounts was no less than £321 million. But what was just as serious as the amount of the deficit was that it was no longer clear just how that vast amount was being spent. The Act had changed the system of support. No longer were the separate services separately identified. Support was on a blanket basis. The net result today is that we are spending millions more but with much less information about the areas in which the money is spent. Whatever may have been the arguments in the past on this specific point, I hope that the Government will recognise that the new system introduced by the 1974 Act has proved to be unsatisfactory.

I make no party point. Both parties have joined in the system that has been produced. It is incumbent upon the Government to recognise that the new system is unsatisfactory. It is a situation that my right hon. Friend the Member for Finchley (Mrs. Thatcher) warned the House about when she spoke on Second Reading in in 1974. Her warnings have proved correct.

We shall very soon need new legislation for railway support. Doubtless that will be part of the Government's new Transport Bill. As I have said before, I believe that there is an overwhelming case for achieving as much agreement as possible between the Government and the Opposition on railway policy, but if the Government are to carry our support we must have a financial system that provides Parliament and the public with the maximum information. The present position is that we spend more and more on railway support and know less and less about the finances and the economics of the railways.

That is a fundamental omission for two main reasons. First, it makes it impossible for the Government to take decisions and set policy. No doubt the sensible way of proceeding is for the Government to make contributions to the services that they decide should be supported, but that does not mean that all services should receive support. For example, the inter-city services are naturally viable and have considerable advantages over the competing mode of air transport on grounds of cost and safety. A contra-example is that of some commuter services. The problems of the two peaks often make it impossible for British Rail to break even. But to give specific support for specific services means that we need information on the services that British Rail says no longer exists.

British Rail says on the one hand that it has produced a plan in response to the consultation document that envisages 7½ per cent. real increases in commuter fares, yet it says that it is unable to operate commuter services in a way that will enable it to cover an equivalent of their full allocated costs. But what is the basis of that calculation? Hitherto British Rail has said that no separate costs of that sort are kept. The point was made in a response to the consultation document. The responding organisation stated: that the absence of any precise definition of the term 'allocated costs' precludes proper consideration of this question. That was not the response of a commuter organisation but the official response of the Labour Party organisation from Transport House.

Not only is the system inadequate for the purposes of the Government. It is inadequate for the passengers, who are simply not provided with the information which they have the right to expect. The second reason is that if we believe that Parliament should monitor policies and major decisions of the Government and nationalised industries, again it must follow that the information we have at the moment is sadly deficient. As I suggested on the Second Reading of the Transport (Financial Provisions) Bill, I believe that the railway problem in this country is probably misstated. It is probably more of a rail freight problem, and, therefore, subsequently, less of a rail passenger problem than the accounts indicate.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

Will the hon. Gentleman help us before he gets us lost in these details?

Photo of Mr Norman Fowler Mr Norman Fowler , Sutton Coldfield

When I give way to the hon. Gentleman he may take up the point. I will give way to him in a moment.

Here again the 1974 Act has obscured the position by allowing freight to operate on what even the consultation document describes as a "favourable accounting basis". It is that rail freight business bears track and signalling costs only on lines which it uses exclusively. When it shares such lines with the passenger business it is the passenger business which bears that cost.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

I am trying to follow the hon. Gentleman's argument because much that he says appeals to me. But I understand that the draft instrument is recommending that we comply with EEC Documents Nos. 1191 and 1192, both of which I disagree with. The House has agreed, however, to obey Common Market directives. I understood the Minister to say that the £600 million increase from £900 million had already been provided. Would it not, therefore, be more appropriate to raise the detailed questions of finance at another stage since we are here dealing with the provisions of the instrument?

Photo of Mr Norman Fowler Mr Norman Fowler , Sutton Coldfield

The hon. Gentleman is profoundly wrong. If he goes back to the Second Reading debate on the Railways Act 1974 he will see that my right hon. Friend, now the Leader of the Opposition, raised this specific and important point. The EEC regulations, however, allow the Government to decide on the method of support which they will use. It is open to the Government to use the existing system of blanket subsidy. It is also open for them to use an alternative method which would be much more akin to the provisions of the 1968 Act.

Certainly the 1974 Act received the support of both sides of the House, but in this last stage of it I think that we must consider the lessons for the future. That is why I think that in all probability this is the crucial question that the House must consider. The present method of finance for the services provided is a highly favourable basis for the freight side. It is highly questionable whether it is fair to the passenger business or to competing modes of transport. What arguments are used to defend that position? Only one is used—that it is difficult to distinguish between the costs of the passenger services and the costs of the freight services. The argument is that there are so many joint costs that it is impossible to differentiate between them.

I would not accept that position. In the United States costs are apportioned between Amtrak, the passenger side, and Conrail, the freight side. If either of these runs over the track of the private railroad companies, as they do, there is an accounting system by which they are charged a fair price for the use of that track. Not only did we once have a system involving separate costs, in this country but much of the information needed already exists. It would not be difficult to distinguish between passengers and freight. In the rail workshops separate accounts are already kept. Operating costs of terminals are split between the passenger and freight businesses. Even with track and signalling costs—said to be the most difficult aspect—separate accounts are kept distinguishing the costs.

I emphasise the crucial nature of this division. In 1975 track and signalling costs totalled £273 million. If too much of that is loaded on to the passenger business, it should come as no surprise when its accounts look disastrously bad.

We Conservatives believe emphatically in the future of the railway industry in this country. Some of the services run by British Rail are as good as any in the world. But the future of the industry lies not just in the hands of the Government but with those who work in the industry as well. The British Rail Board has said that improvements in productivity are possible, and that the number of staff can be reduced by 40,000 by 1981, not by massive redundancies but by natural wastage and control of recruitment. That opportunity should be taken.

Equally, it should be realised that a wages explosion would have a disastrous effect on fares. About 67 per cent. of British Rail's costs are labour costs. Like every other comparable passenger service, the industry is labour-intensive, and a massive wage increase means a massive fares increase. I hope that we have learned that from the experiences of 1974 and 1975.

I do not pretend for one moment that the Government generally or the British Rail Board have an easy task over the next few years. The Government have made clear that no more money is available beyond the level of support that is now being given. We support that position, and we do not seek to make capital out of it. We should remember, however, that the level at which the Government are seeking to stabilise the position is historically a record high.

We expect more from the Government. We expect new legislation to give a much clearer picture of the financial position for the benefit of Parliament, the public, and, particularly, the passenger. We want an efficient railway industry and a period of stability during which the most important person in that industry—the passenger—can hope for an escape from the nightmare of ever-increasing fares.

10.48 p.m.

Photo of Robin Cook Robin Cook , Edinburgh Central

It is in the nature of your office, Mr. Speaker, that you have to listen to a large number of debates in this Chamber. You will, therefore, be aware that the nationalised industries come in for a great deal of criticism in this House, particularly when we are debating a proposal which increases the amount of resources to be made available to one of these industries. It is particularly appropriate that when a nationalised industry has kept within the limits set by the House we should give due recognition to the fact and congratulate it on achieving its target.

I found the remarks of the hon. Member for Sutton Coldfield (Mr. Fowler) less than generous. That fact is that in 1974 the House approved a figure of £300 million per annum as the passenger service obligation for British Rail in the succeeding five years, and British Rail has stayed within that target in real terms for each of the last three years. We may differ as to the extent to which that represents a real effort and achievement by British Rail, but the fact remains that industry has kept within the targets set by the House.

Photo of Mr Norman Fowler Mr Norman Fowler , Sutton Coldfield

But no target was set in the way the hon. Gentleman suggests. Indeed, the Ministers of the day were emphatic in not giving that kind of target. They certainly did not give the five-year target of £300 million per annum of which the hon. Gentleman spoke.

Photo of Robin Cook Robin Cook , Edinburgh Central

The 1974 Act was passed on the clear understanding that there was a maximum figure of £300 million per annum for the consolidated passenger service obligation, and the fact remains that British Rail has stayed within that target.

I found a little curious the hon. Gentleman's reference to fare increases in the past three years. It is not self-evident that if there had not been an increase in fares in that period, the passenger service obligation would be even greater? Surely, if there had been no such increases we would now have been debating an even larger increase.

Some Labour Members, including myself, feel that the fare increases in the last three years have been so large as to be counterproductive and have resulted in traffic losses. Yet their size was largely because—as Mr. Richard Marsh said when he left British Rail—the last Conservative Government had interfered when he wanted to increase fares. They did not allow him to make any increases in 1973, and in 1972 allowed him only half the amount of the increase he proposed. That was one of the reasons for the large increases in the last two or three years.

In listening to some Opposition Members, one might be forgiven for thinking that they are under the delusion that British Rail is unique in not running a profitable railway industry. The truth is far different. The hon. Member for Newbury (Mr. McNair-Wilson) in the debate on transport policy a few weeks ago said that we in Britain do not take sufficient pride in the achievements of British Rail. He made that remark hav- ing recently visited European countries whose railways register a far larger deficit than those to which we are accustomed in the United Kingdom. If the hon. Member for Sutton Coldfield had taken the trouble to spend five minutes or so in the Library consulting Jane's World Railways, he would have seen in the foreword: Few but the incurably optimistic can have expected railways to do anything but barely keep afloat on a deepening sea of red ink through 1975. If he looks at the figures he will see that there is a "deepening sea of red ink" in many other nations. Last year West Germany gave its railways subsidies amounting to £3,000 million. The French Railways had record deficits in 1974 and 1975. Even in Japan, about whose modern and progressive railway system we are always hearing, the deficit last year amounted to 160,000 million yen. I cannot translate that figure into pounds, but I gather that it is a pretty large deficit.

Photo of Mr Ronald Atkins Mr Ronald Atkins , Preston North

The subsidy in Japan works out at about £2½ thousand million per year.

Photo of Robin Cook Robin Cook , Edinburgh Central

I am grateful to my hon. Friend for translating yen into pounds in such lightning fashion. Therefore, in comparison with the sums registered in other countries, the sums sought by British Rail are modest.

One of the reasons for that is the contributions made to running a railway by the efforts of the staff. It was, again, less than generous of the hon. Member for Sutton Coldfield that the only reference that he made to the employees of the railway industry was to mention that a massive wage rise would prejudice the finances of British Rail. He did not say anything about the contribution made by the employees of the industry to British Rail's very good figures—which compare well with those of railways of other nations. Indeed, the manpower of British Rail have made their contribution to the industry staying within the £300 million target that we are discussing tonight.

There is no other industry that has faced a reduction in manpower comparable to that of British Rail—a loss of 400,000 men since nationalisation. It has one-third of the manpower that it had in 1945. Yet when we were debating the matter less than three weeks ago, hon. Members opposite said that it was unfortunate that the rate of reduction in manpower had slowed down during the past decade. It is as well that the rate of loss has slowed, because if the rate of loss in the past decade had been as great as in the preceding one we should not have any railwaymen left at all. Nevertheless in the past year, 7,000 posts have been slimmed from British Rail's manpower with the full co-operation of the unions representing the employees of that industry. On that basis, we are well within the target of a reduction of 40,000 jobs by 1980 that was set by the Chairman of British Rail.

There would, perhaps, be some justice in thinking that the process has gone too far. The average working week of British Rail employees is 52 hours, which is substantially higher than the average in industry generally. BR employees work 40 per cent. of their rest days. Guards work 68 per cent.—a figure that compares unfavourably with any other occupation except perhaps our own profession.

The hon. Member for Sutton Coldfield made a tangential reference to massive wage increases. No doubt he was referring to the figures that were reported the other day. I would bring to his notice a figure that was tucked down in the columns of that report. It is a figure of £36 million that represents not the cost to British Rail of any increases in wages or additional payments but the cost of consolidating within the basic wage the awards given in the two years under the statutory incomes policy. That represents the addition costs of paying, on the basis of that consolidated wage, for the overtime worked. When we have an industry that faces a potential addition to its wages bill of £36 million simply in consolidating wages and paying existing hours worked in overtime, we must say that the problem is not one of overmanning but that there are not sufficient workers around to keep down the rate of overtime and the rate at which rest days are worked.

Whatever view one takes of that, the manpower of British Rail has made a substantial contribution to keeping within the target that the House has set. The House should give British Rail employees recognition for that and due congratulations.

I do not necessarily regard the 1974 Act as the most satisfactory way in which to finance British Rail. Indeed, in fairness to British Rail, it has never regarded the Act in that way itself. On page 33 of its response to the consultative document, British Rail made it clear that not only did it not accept the Environment Department's proposal for the 1974 Act before the Act was drafted but even now: The Board does not consider that this has proved satisfactory and accordingly would wish reconsideration. Therefore, I hope that the Minister will be willing to reconsider the basis upon which British Rail is financed.

I want to put to the Minister some points that should be considered in the course of the review. It is time that we considered whether it is appropriate for British Rail to meet trading costs for operating both the passenger and the freight networks and at the same time carry the cost of the permanent way. Many of us feel that it would be an attractive solution if the Government took over the cost of the permanent way, thus creating a more equitable system of financing between road and rail. I do not want to get into the argument about the relative costs of road and rail transport, but if the true costs of the road network were accountable in the same way as British Rail has to account for the costs of all its infrastructure, the economics of road transport might appear very different. I recognise that this is a major step and that we cannot expect anything in anticipation of the White Paper or the statement of Government policy on this matter.

Another possibility which would not require additional finance or serious consideration in Cabinet committees but would make a substantial contribution to putting British Rail on a more stable footing, would be to put the investment programme on a rolling basis rather than on a year-to-year basis. This is already done wth the road programme, which is always 10 years in advance so that we always know the investment programme for 10 years' ahead.

We know British Rail's investment programme only a year or two in advance, and the consultative document does not suggest much of an advance—an increase from one year to two or three years. That is hardly a major step forward.

British Rail estimates that it could save 10 per cent. if it could forecast its investment programme five years in advance. That would represent a saving of £10 million a year on the investment programme—a substantial sum. Such a saving would benefit not only British Rail but the associated manufacturing, engineering and supply industries too.

We are in danger of forgetting that behind British Rail there are substantial supply and manufacturing industries with far more jobs than the railways alone provide and which make a substantial contribution to our balance of payments by exporting to the many growing rail markets throughout the world. Those industries can survive in a very competitive export market only if they have some security in their home market. Unless we can give them some stability and tell them what they are likely to have to supply in the next three to five years, they will not have that stability at home and will not be able to compete with other countries that give such stability to their manufacturing industries.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Gentleman is making a long and interesting speech, but so far he has succeeded in totally failing to mention the customer. Does he think that the railways are run entirely for the benefit of supply industries and railwaymen? What is his view of the unfortunate people who have to use the railways? Are their views not in his thinking? Should they not be considered occasionally? Is he aware that they have virtually deserted the railways?

Photo of Robin Cook Robin Cook , Edinburgh Central

If the hon. Gentleman had been listening to my speech with his usual care and attention, he would have heard me say at the beginning that many of us believe that people are deserting the railways because of the very high fares increases of the past two or three years. I sympathise with the customer. I am a very frequent customer of British Rail and I am conscious of the effect of these fare rises on the customers. If we took the logic of some of the figures that I gave earlier in relation to other countries and we were prepared to subsidise passenger traffic as do Japan, West Germany and France, for example, we should be able to assist our customers far more than we do at present.

I am sorry that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is leaving the Chamber and taking with him the speech that he had been preparing. We were looking forward to it with interest and anticipation. It will be a great loss to the record that we are not to have those words of wisdom in Hansard.

I hope that my hon. Friend will not draw the inference that our system works satisfactorily. It does not. I hope that in the debate on the Transport (Financial Provisions) Bill, if we succeed in getting it into Committee, and in the subsequent debates of the White Paper we shall consider how to provide a system which will give British Rail greater stability and enable it to compete with the road industry on a fairer footing.

11.6 p.m.

Photo of Mr John Cockcroft Mr John Cockcroft , Nantwich

After that interesting and thought-provoking speech by the hon. Member for Edinburgh, Central (Mr. Cook), I shall say a few words about by impressions of the railways. I have also been to the Continent recently. I discovered—not to my surprise—that every railway in Europe and in the rest of the world makes a loss. The degree of loss is difficult to assess, because of different densities of population and varying income per head of population.

The debate is really about specific plans for specific lines. I am concerned that general subsidies for the railways involve a rather open-ended commitment. Railways will never make a real profit here or in comparable countries. The Beeching era was an improvement on the Robertson era, because, under Beeching some attempt was made to identify those lines which made profits and those which lost on the operation and an attempt was made to allocate overheads from the centre. Before Beeching there was little idea about which lines made a profit and which lost money.

Every Government have sought to isolate and identify the cost of each railway line and to provide specific subsidies for specific lines, but in the last decade the problem of allocating central overheads has remained. There has also been the problem of balance between freight and passenger services, many of which run on the same lines. An attempt must be made to solve that problem, although the answers will never be perfect.

The fundamental problem is that the taxpayers' commitment to the railways has become open-ended. There have been successive writings-off of their capital, so that now it is impossible to lay down realistic criteria to judge the investment results from one year to another. Despite these difficulties, it is essential to identify individual loss-making lines and to decide on what basis so-called "socially desirable" lines should be subsidised, whether from central or local funds.

It is essential for morale, both of management and employees, that there be definite criteria for assessing the finances of British Rail. It is also essential that British Rail identifies the costs of its own operations and decides how to cover most of them, at least, otherwise, management will become impossible.

No one can accurately assess the cost of road traffic congestion. That is the strong case for maintaining the railway network at roughly its present size. The question of relative track costs is endemic and fundamental to the debate. The railways pay for their own track costs in so far as they are not subsidised. Buses and lorries, on the other hand, are not subsidised in the same way. Although their operators pay heavy taxes, they do not pay directly for their own track costs. Their marginal costs are very much less than those of the railways. That is the fundamental problem. We shall probably never resolve it, but at least it helps to recognise what the problem is.

There is also the fact that freight services apparently pay only their avoidable marginal costs. On the other hand, to that extent they are cross-subsidised by the passenger services, and to that extent the passenger services of British Rail appear to lose more money than, in real terms, they probably do. That, again, is a fundamental point.

Finally, I make the plea that we should bear in mind that, in a way, the problems that we are discussing are insoluble and under no Government shall we find a perfect answer. Sub-Committee A of the Select Committee on Nationalised Industries should have the maximum possible information about these matters, which to some extent are intangible, and more homework should be done, as far as possible, by British Railways themselves.

11.11 p.m.

Mr. Ted Lead bitter:

On a matter as important as this, the first observation that one should make is that it is regrettable—I go no further than that—that the debate is taking place at this late hour and in a short and restricted period. The debate concerns a large amount of money and a very important service.

My second regret is that because of the shortness of time Members are not able, whatever overall views they hold, to attribute to those who work in the rail industry the great credit that they deserve. Apart from the party political cut and thrust of things in the House, all of us, throughout the country, must pay due regard to their work. In my experience, those who work in our nationalised industries—British Rail, the coal industry, electricity, gas, and so on—have never had from the House of Commons, in full—because of the intensity of the party political points—the compliments that ought to be paid to them for the manner in which they have transformed those services from the dead hand of private enterprise, which so long ago did not even give the shareholders a fair return for their investment.

Therefore, before anything else is said, the ordinary British working people in those industries, no matter how we may think that they manage, must have from this House that signal compliment for which they have long been waiting.

The third regret that I must mention is that we are here looking at a condition of payment that falls in line with the requirements of EEC Regulations Nos. 1191/69 and 1192/69, which are dated June 1969. The House of Commons is ill-prepared to be able to appreciate the implications of these very complicated documents in a debate such as this. They have been available in the Vote Office, but had it not been for the draft instrument drawing my attention to them, I should not have thought myself able to ask for documents dated so many years ago. I am mindful of the fact that the Government, by virtue of the Railways Act 1974, particularly Section 3, with which we are dealing, would have these documents in mind. It is becoming a point about which the House should be concerned. The House appears to be helpless in dealing with their implications of EEC documents. We are therefore denied a knowledge of what they mean.

I must point out that in Regulation No. 1191/69, Article 1, there is this very unhappy paragraph: Member States shall terminate all obligations inherent in the concept of a public service as defined in this Regulation imposed on transport by rail, road and inland waterway. I find those words ominous. As a Socialist, I have always looked upon the idea of nationalising an industry as carrying with it the concept that it must provide a public service. Otherwise, it does not make sense to me.

My fourth regret is that we have not had before us the kind of financial account that helps us make a true evaluation. That is a matter to be discussed at another time, when we can debate the whole question of transport policy. My hon. Friend the Minister has an important stake in the Northern Region, where we have transport problems. I take it for granted that, as Minister, he has looked at the matter with care and has given the House an honest appraisal.

My hon. Friend underlined his submission by saying that we were talking about the conditions written into the 1974 Act, and that therefore the amount of money sought in the order was already calculated in principle by the House two years ago. Accordingly, we are really concerned with how the money will be spent over, I presume, the next two years, and we are given a breathing space. I shall not repeat anything of the excellent, detailed speech of my hon. Friend the Member for Edinburgh, Central (Mr. Cook), who has given us sufficient food for thought in our discussion of the whole question of transport policy over those two years.

The fundamental question is how best, although we are in the Common Market, to provide a transport service that is a public service and to evaluate the costings of rail as compared with road and seek to provide equitable accountancy treatment, so that we do not have the disparities that become the subject of party political warfare. A part of the assistance to the rail service goes towards the cost of the upkeep of rail crossings; there is a contribution towards pensions; and there is further financial aid for dealing with freight. We must bear in mind that all the costs of rail services, such as the railroad, policing, lighting and manning, are in many respects costs that we do not consider when we think of our road services.

We must see how best to harmonise our road and rail services. Some of my colleagues with a special interest in transport belong, as I do, to our Transport Sub-Committee. Our chairman, my hon. Friend the Member for Preston, North (Mr. Atkins) is present tonight. For the past year and more we have been discussing how best to have an integrated transport service. I am the first to agree that "integration" is perhaps the wrong word to use, but our language is very limited and for the purposes of a small debate such as this it is the best word to put over my point.

We must bear in mind that our rail services will never be profit-making, because of factors that are found throughout the world. Not only must we harmonise road and rail costings, to put that in perspective; we must consider another necessary form of harmonisation. Forms of communication and technology are changing so rapidly that we must have an interface of road, rail, air and sea transport. The ports and airports must be brought into these costings to give them an international as well as internal point and purpose, and give a guide to efficiency.

As I indicated, these few remarks are complementary to the outstanding and detailed speech of my hon. Friend the Under-Secretary of State for Transport and I hope that he will take them into account. Two years will pass all too quickly, and he should take some of these ideas on board.

11.20 p.m.

Photo of Mr Peter Temple-Morris Mr Peter Temple-Morris , Leominster

The hon. Member for Edinburgh, Central (Mr. Cook) and the hon. Member for Hartlepool (Mr. Leadbitter) championed British Rail fluently and well, but they seemed to presume that the Conservatives do not approciate the achievements of British Rail—although, to be fair, the hon. Member for Edinburgh, Central complimented by my hon. Friend the Member for Newbury (Mr. McNair-Wilson) on mentioning those achievements. My hon. Friend is not the only Conservative who has done so; I, too, acknowledge British Rail's achievements, and also the loyalty of a work force that is quite unique in this country—and I say that in no patronising spirit but because it happens to be true.

In this short debate I shall try to help us reach some sort of rapport on the future of transport. I suggest to the hon. Member for Hartlepool that in this third decade of nationalisation we should forget the evils or otherwise, of the private owners and get on with the future, bearing in mind that we would probably all agree that very few people would buy the enterprise anyway, and that it will remain publicly owned, whoever are in Government.

How are we to get value for money—money that this House and the Government, whichever party is in power, will have to provide? How can we best control the money as a House, bearing in mind that we have the prime responsibility?

In finding an answer to the question how we get value for money, there is a desperate need—this is where successive Governments have failed—for a stable planning base for British Rail. I agree with what the hon. Member for Edinburgh, Central said in that respect. Until we get that, we shall get nowhere. This debate, and any major debate on British Rail and transport generally, will fail unless we accomplish it. I welcome the coming White Paper on transport. I hope that we shall be able to achieve—we must, if we are to get anywhere—a reasonable spirit of bipartisanship on British Rail and the White Paper.

Naturally, we shall differ. The Conservatives will go more for competition, while Labour will go more for the public service angle. But I feel that in the debate we have already set the pattern for a bipartisan approach. It is now our responsibility to establish it, because if we do not I am afraid that there will be no stable planning base for British Rail—it is as simple as that.

A depressing feature of British Rail has been the constant changes of policy as Governments have changed and as enactments have followed repeals and repeals have followed enactments. The people are sick of it. Now we have an almost unique opportunity to settle our difference and pioneer the way to providing for British Rail something that can last—something that through five changes of Government, 14 Ministers of Transport and seven chairmen of British Rail since nationalisation, we have not achieved. We must get it right this time.

In this debate about the amount of money to be made available for rail, a slight slanging match is developing between road and rail and also between trade unions representing different sides, employers representing different sides, and the public and private sectors. Frankly, the Government, the private and public sectors and the trade unions must cooperate.

The lobbies that all politicians face are formidable. There are probably more lobbies in the transport sector than in any other. In the end, the Government must decide. Great and lasting strength will be given to the decision if it has the backing and is with the consent of this House.

I turn now to the second point, which concerns financial accountability and who should control these grants. There is something depressing about being here for one and a half hours talking about £600 million. It is a sobering thought. I appreciate that this is the second tranche and that it has already been discussed. But how can we control this £600 million, or even £5, with the kind of proceeding in which we are indulging?

We should address our minds—I should be interested if somebody picks up this point on either side of the House—to the question who is the best body to be responsible for the accountability that we must have. It cannot, at the end of the day, be the Government. The Government, the Secretary of State, the Under-Secretary and the Department will make ultimate decisions but their difficulty is that they cannot unduly interfere with the day-to-day running of any nationalised industry—that is against the whole ethos of our nationalisation—although they have power to intervene, and will no doubt do so, on major questions.

On accountability and control, I should like to refer to the most effective body to carry out those functions, which surely would be this House. I may be contradicted, but I think that we are failing in this sphere, as in so many other spheres, by our procedures to control effectively not only the Government but all these great nationalised and Government sectors that are daily growing and getting stronger.

Apart from the proceedings in this Chamber, which, however many good points are raised, we all know do not effectively control anything, we come to the idea of the Select Committee on Nationalised Industries or Select Committees generally. With due humility, because I have not yet served on one of these Select Committees, I have my doubts about their efficacy. I say that because of what I have leaned from talking to many who have served on such Committees and of having seen them in operation. Indeed, in a recent conversation with a senior executive—not of British Rail but of a nationalised body of almost equal distinction—he said that, on his personal appearance before that body, he appreciated its expertise, the ability of its Members, and so on, but "It never put me in any trouble at all. It never touched my housekeeping." Surely that is what we are dealing with today—a rather large sum of housekeeping. If that Committee, which has done a lot of good work, cannot touch that gentleman's housekeeping, frankly, it has not got a chance of touching British Rail's housekeeping either.

I do not want to get distracted into an analysis of the efficacy of Select Committees, but I should like to add one comment about them. Unless there is a controlled form of questioning by at least one individual who is properly briefed and has the back-up—not just an odd retired civil servant, but a person with the proper back-up to be able to put questions that can be followed by the members of the Committee—there is no hope.

At the moment we have the added complication that even if they do a good job,—which they frequently do—nobody least of all the Government of the day, takes the least bit of notice of them. Unless we do something about it, there will be no effective way of stopping many more one-and-a-half-hour debates on this as on other subjects.

Finally, I want to make clear a brief comment about one aspect of British Rail, it is one that has mainly been covered. One accepts the social needs of the railway service, that some parts are loss-makers, but we must have an accounting system that identifies what is uneconomic. Above all, someone must have the power to find out why and to oversee a massive and continuing public investment. The most effective body to do that—at the end of the day, virtually the only one—is this House. It is on this sort of thing that we shall be judged in future.

11.30 p.m.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

The hon. Member for Leominster (Mr. Temple-Morris) has put his finger on a very important point. So important in general terms is the performance of a publicly owned body vis-àvis this House and the consumers that I have not the time to follow him down that path.

There has been an extraordinary unanimity tonight, but there are differences and the hon. Member for Nantwich (Mr. Cockcroft) put his finger on one. Both he and the hon. Member for Leominster wanted the loss-making lines singled out individually. That is a difficult process and has always been shown to be so. Dr. Beeching did not get it right, nor has any subsequent formula. That is why we have the present global approach.

The hon. Member for Sutton Coldfield (Mr. Fowler) mentioned the distinction between freight and passenger costs in the United States, but there the amount of passenger revenue relative to freight is very small. Many of the freight lines crawl along at 20 m.p.h. The situation is not comparable.

The essence of the order is the £300 million that we are asked to agree to spend. In a debate on, I think, 12th November, I said that more than 40 per cent. of British Rail income comes from London and the South-East. Therefore, even assuming that the support is rather less in that area, services there will probably get about £100 million from the order. As they say in football commentaries, I am glad to welcome the Secretary of State for Transport, who has joined the closing minutes of the debate. We are glad to see him here. This is a large sum. The Government cannot now say that the day-to-day administration, in the sense of commercial policy of the railways, is not a matter for them.

An angle of railways policy that has not so far been brought out tonight is its connection with the inner city problem, which is now engaging the attention of the Department of the Environment. If £100 million of public money is available to support the vital rail services of London and the South-East, that money should be complementary to keeping alive the central areas of London, especially the older areas. I am sure that that is a point of which Ministers are seized. It is not vital that the trains should run half empty half the day, but if that capital investment is there it should be used properly.

In my constituency, British Rail on my suggestion and that of the borough council has recently produced a very nice leaflet, which is being delivered to people's homes, about a new service between North Woolwich and Stratford. The journey lasts 14 minutes and is almost all within the dockland area. But the charge is 28p—1p for every 30 seconds. That beats the cost of almost all commuter routes argued about in this House. If I wish to go from North Woolwich to Tottenham, it costs 52p single or 101p— over £1—return, in a very small area of North-East London. Would it not be possible to devise a commercial arrangement whereby one could get unlimited travel on that line for a round sum per month or per week? Some of the considerations mentioned in the debate on 12th November should be applied to inner London. We are now beyond the stage at which these two matters could be considered separately.

This has been an interesting debate. We are now beginning to get some sort of consensus about what transport we want in our inner city and inner London areas, and we should like to know what the Minister has in mind.

11.35 p.m.

Photo of Mr Michael McNair-Wilson Mr Michael McNair-Wilson , Newbury

I shall speak for only a few minutes. I should like to take up one point in the EEC document. Article 2(1) says: Public service obligations' means obligations which the transport undertaking in question, if it were considering its own commercial interests, would not assume or would not assume to the same extent or under the same conditions. That is a crucial explanation of the money that tonight we are giving to British Rail.

Of course British Rail deserves our congratulations on keeping within its target of expenditure, but whether it achieves that target is within our hands. If we accept the public service obligation as in the directive, what is the obligation that we have asked of British Rail? This has never been spelled out adequately by any Minister for Transport—at least, not while I have been in the House.

We all saw a letter in The Times from Mr. Parker, Chairman of British Railways, dealing with the problem of commuter fares and the difficulties facing him in trying to come to terms with the impossible problem of the two great peaks in the South-East as the commuter comes into and goes out of London. I have today been in the North-East, in Newcastle, hearing details of the problems there and listening to the success story, which is just what it is. But what has stuck in my mind this week has been the words of Mr. Parker—that if we are not careful we shall have a freeze-up on British Rail because of a lack of investment.

When we are talking about public service obligation compensation to British Rail are we thinking simply, as I fear we are, of only the short term and not the long term, as the hon. Member for Edinburgh, Central (Mr. Cook) urged so forcefully in an excellent speech in which he was kind enough to refer to me? If we are thinking of British Rail simply on an area-by-area basis, if we are posing the question posed in the Government's Orange Paper— Would the available funds be better spent on modernising and improving the railway system—or on subsidies to keep fares down"— as though those were options—we are frankly not coming to terms with the financing of British Rail as we should be looking at it for the future.

With the White Paper so nearly upon us, thoughts of the sort that I am expressing will be met by facts or promises for the future. What has been said tonight has cut across party divisions in the House. My plea to the Minister is that he should end this hand-to-mouth living of British Rail and give it a future, which will involve investment as well as an obligation that it faces and meets. We should say that we are prepared to finance British Rail in this regard instead of seeing it as a cause for criticism.

11.39 p.m.

Photo of John Horam John Horam , Gateshead West

The general flavour of the debate has been one of remarkably full agreement between the two sides of the House—a rapport as one hon. Member described it, or a bipartisan spirit, which has underlined the importance that hon. Members attach to the railways. Secondly, there has been a desire to lay down a duty for the railways, that will receive support from the Government and provide a proper basis for long-term planning. I welcome the general tenor of the speeches from both sides of the House. Some hon. Members have apologised to me for not being able to be here for the end of the debate, and I apologise to those hon. Members whose speeches I shall not be able to mention in the five minutes available to me.

I was struck by the point made by my hon. Friend the Member for Newham, South (Mr. Spearing) about our inner cities. As it happens, I am a member of the committee that is looking into the problem of the inner cities, and it is an extremely important problem. The connection between planning and transport, in respect of which the transport consultative document has been criticised, is one to which my right hon. Friend and I are paying great attention. I take account of what my hon. Friend said, because it introduced an important dimension to the debate which otherwise was lacking.

The hon. Member for Sutton Coldfield (Mr. Fowler) went in some detail into the figuring of the railways, but, if I may pull him up on one aspect, he made a mistake when he implied that investment was an amount added to what we gave the rail- ways under the public service obligation grant.

Photo of John Horam John Horam , Gateshead West

The hon. Gentleman does not agree, apparently, but I got that impression from what he said. In fact, support for the investment is paid from the grant which we are voting here. Therefore, it is covered by it and has not to be added to it. One sometimes sees figures suggesting that the passenger railway grant is far larger than the£300 million which we are discussing, but that is not the case.

The hon. Member for Sutton Coldfield nevertheless complained about the money being voted to the railways—a consequence of the 1974 Act which itself had a great deal of bipartisan support. following as it did from the 1973 review conducted by the previous Government. At the same time, the hon. Member talked about the hard-hit commuter. But he cannot have it both ways. Either we subsidise commuter lines or we do not, and I do not think that it is right to try to have it both ways, as the hon. Gentleman was attempting to do. Indeed, he tried to have it three ways, because he went on to complain about the amount of taxation that we were imposing through measures of this kind. That is taking the usual Opposition line on these matters to an extreme which the Government cannot possibly support.

Unlike my hon. Friend the Member for Edinburgh, Central (Mr. Cook), the hon. Member for Sutton Coldfield was rather less than fair in his comments on the railways' achievements in meeting their targets. As my hon. Friend said, it is rare for someone to be given a fairly clear target over a period of years—£300 million in real terms each year—and to come literally within £l million or £2 million of it either way at the end of each 12 months with absolutely minimal adjustments being made. As a piece of forecasting and a piece of management and union achievement, it is probably quite outstanding in the history of any industry, whether private or nationalised, and probably also in the history of any Government. That is a matter on which the railways are to be congratulated.

Despite this, the hon. Member for Sutton Coldfield maintained that the system was unsatisfactory, and some of my hon. Friends echoed his remarks. He advocated a return to the 1968 Act, although he said that it was not perfect. It was interesting to hear that, after all the years of ferocious fighting about the 1968 Act. Hon. Members will recall that it was the measure which, until the Housing Finance Bill, had the longest Committee stage in the history of this House. Given the accolade that the hon. Gentleman now accords it, it is surprising that it was contested quite as much as it was. But he will remember that that legislation was abandoned by this Government in respect of this railway grant, following the review of his own Government.

There were reasons for that. As my hon. Friend the Member for Newham, South said, there are problems with allocating costs in this way. Indeed, there are problems in whichever way we consider British Rail costs. It is a genuinely difficult problem. The problem of joint costs is well known, and I do not think that the hon. Member for Sutton Cold-field should claim so glibly that these matters can be dealt with over-night and that if we had a fully allocated cost system—

It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted Business).

Question agreed to.

Resolved,That the British Railways Board (Increase of Compensation Limit) Order 1977, a draft of which was laid before this House on 25th January 1977, be approved.