British Rail (Privatisation)

– in the House of Commons at 3:30 pm on 14th July 1992.

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Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee 3:30 pm, 14th July 1992

With permission, I should like to make a statement about the Government's proposals for the privatisation of British Rail, which are set out in a White Paper published today.

Under Conservative Governments, there have been many examples of the benefits which privatisation has brought to former nationalised industries. It has taken different forms in different industries, but common objectives have been the harnessing of the management flair and enterprise of the private sector, the application of the disciplines and incentives of the marketplace, the opportunities for private finance and for greater competition and choice which privatisation brings, all to provide better services for the public.

The Government believe that it is now time to extend those benefits to the railways. British Rail is dependent on substantial subsidy from Government and makes large losses so it is not possible to sell all of BR, either as a single entity, or as separate businesses. But our objectives, of improved efficiency, of new incentives for operators to provide the services which the customer wants, and of new opportunities for the railways can all be achieved in other ways than a single outright sale, and that is the purpose of our proposals. Altogether, they comprise the most radical changes to Britain's railways since 1948, but our flexible and practical approach to change will ensure that they are workable and realistic.

First, our proposals provide a variety of opportunities for the private sector. For passenger services, the Government have decided that the most effective way is through franchising, enabling private sector companies to bid for the management and operation of passenger services, in return for grants where necessary. Franchisees will be required to meet specific standards of service, which will be set out in their contracts.

Franchising will be carried out progressively and flexibly. The Government intend that in due course all BR's existing passenger services should be franchised to private operators. The establishment of local or regionally based franchises will help to revive local pride and identity.

Secondly, BR's existing freight and parcels business will be sold to the private sector. Thirdly, we will additionally provide a new right of access to the rail network for private operators of both freight and passenger services. We want as much freight as possible to be carried by rail rather than road; these new opportunities should help to bring this about.

Fourthly, to facilitate those new arrangements there will be a new structure for the railways. BR will be divided into two separate parts. One will become a track authority—Railtrack—with responsibility for all track and infrastructure. The other will become a residual operating company responsible for operating the passenger services which are not yet franchised. When franchising is complete, BR's sole function will be as Railtrack.

Fifthly, we will set up two separate independent authorities responsible to Government: one, a new franchising authority responsible for negotiating, awarding and monitoring franchises; and the other, a new rail regulator to oversee the application of arrangements for track access and charging, to promote competition, prevent abuse of monopoly power and promote the interests of customers.

Sixthly, we will provide opportunities for the private sector to purchase or lease stations, which will bring benefits to passengers, operators as well as to others. Finally, we will substantially alter and improve grant arrangements. At present, a single grant is paid to BR to provide supported passenger services. Under the new franchising regime, by contrast, grants will be made for individual services or groups of services. This will be more transparent and will enable the taxpayer to know precisely what services his grant is buying.

The Government will introduce legislation to implement the proposals later in the year. In the longer term, the Government would like to see the private sector owning as much as possible of the railway. We therefore propose to take powers in the legislation to allow the future privatisation of all BR's track and operations.

There are a number of other vital points I should stress. In developing the proposals, safety has been of paramount concern. The Government are committed to ensuring that their proposals will not lead to any weakening of the high standards of safety on our railways. Operators will have to meet strict safety requirements overseen by the Health and Safety Executive. I have been advised in the framing of the proposals by the Health and Safety Commission, and it will be making detailed recommendations for the appropriate safety arrangements.

We fully recognise the importance of regional and commuter services to the people who depend on them. The Government have throughout made it clear that we are committed to continuing support for socially necessary passenger services. The statutory procedures for any closure proposals will be retained.

British Rail has made significant improvements in recent years. Investment in the railways has greatly increased. The productivity of the British Rail work force is among the highest of any European railways. I pay tribute to the considerable efforts of everyone in British Rail in bringing that about. Private sector involvement will help develop the quality and quantity of rail services even further. There will now be new opportunities for those who work in the railways and I want to ensure that they are able to benefit from them. The existing work force will be able to transfer to new companies when they are established, and there will be opportunities for employees to take a stake in their industry when they are in the private sector. Management-employee bids for franchises will be encouraged and assistance will be given to staff seeking to make such bids. Pension rights and entitlements to concessionary travel for present employees will be safeguarded.

The detailed proposals I am now putting forward are based on our election manifesto commitments. I look forward to working with the chairman of British Rail, with whom I have agreed new objectives for him to implement; and all those in the industry to bring about the changes I have outlined. Our aim is simple: to improve the quality of railway services for the travelling public and the freight customer. Improved quality of service will make the railways more attractive, improve their competitiveness, and enable them to take full advantage of the new opportunities open to them. I commend the proposals to the House.

Photo of John Prescott John Prescott Shadow Secretary of State, Member, Labour Party National Executive Committee, Shadow Secretary of State for Transport

This White Paper has been subjected to more delays and cancellations than the average commuter train on the Government's rail services. After 10 years of ideological rhetoric from numerous Secretaries of State for Transport, we have a White Paper that reflects a clash of reality with rhetoric. Its 20 pages are concerned more with presentation than with substance.

It appears that we can be thankful that the White Paper rejects past solutions and that there is to be no wholesale sell-off of British Rail, no regional break-up and no sell-off of the passenger sectors. But unfortunately, there is no recognition of the way in which a modern railway system can meet the transport needs of an economy which is increasingly plagued with mounting congestion and environmental costs.

The White Paper is no passengers charter, judged even by the Government's limited standards. It is more a cherry-pickers charter—ripe for exploitation by property speculators, by route operators bribed by public subsidies and, inevitably, by Tories' City friends growing fat on commissions and fees—[Interruption.]—resulting from the disposal of public assets. That has been the real record of the privatisation of every public utility under the Conservatives—higher prices and higher profits, all paid for through higher prices paid by the consumer.

The White Paper is irrelevant to the requirements of the railways for financial support, an adequate infrastructure and rolling stock investment, as evidenced by the excellent publicly owned railway systems in Europe. They have shown not only that sufficient financial resources are needed but that investment can produce a modern railway system, even when owned by the state. It is equally irrelevant to the needs of the economy, with millions of people unemployed, the nation diving into deeper recession, a collapsing infrastructure and a declining investment base.

The White Paper takes Britain in the opposite direction to that of our European partners, which in the last 10 years have invested billions of pounds in their railways' rolling stock and infrastructure, allowing for sufficient financial support, while we, over the same period, have reduced support by billions of pounds, providing a more costly railway system of lesser quality. That is the reality of 10 to 13 years of Tory railways policy.

I was pleased to hear the Secretary of State acknowledge the recent Economist intelligence unit report, which made a comparison between British Rail and railway systems in Europe. It revealed the levels of efficiency and productivity and placed British Rail among the top three in Europe. Everyone should acknowledge the contribution made by the workers and management to achieve that position.

That report showed that quality and reliability of service had been achieved through the resources provided by other European countries for investment in their railway systems. It also pointed out that the sums available for the railways from the private sector, by way of private loans or leasing, made an important contribution to the quality of their railway services.

Will the Secretary of State say, as he is considering a leasing arrangement for private operators, whether British Rail will be allowed to lease its trains, as is the case in most European railway systems? Is he aware that, if he does not allow that to happen, it will be felt that there is an ideological prejudice against British Rail, and that that will prevent our system from being improved?

Does the right hon. Gentleman accept that bus deregulation and privatisation, on which much of the White Paper is modelled, has led to a reduction in the number of passengers travelling by bus, to a lowering of services, to older vehicles being in service because of a failure to invest, to the need for heavier subsidies and to increased fares? Is that what the right hon. Gentleman intends for our railway system? Does he think that that is the way forward to create a modern railway system for Britain? Is it not a fact that a reduction in standards has resulted from most privatisation exercises?

Does the right hon. Gentleman accept the evidence of conflict between a business-led railway and the high safety standards necessary for passengers, a point emphasised by safety inspectors in their conclusions following inquiries into terrible railway tragedies that have occurred in this country, connected directly to a lack of resources in the railway system?

Will he now accept that the new Health and Safety Executive authority, about which he talks in the White Paper, should become totally independent of the Department of Transport? Will he assure the House that he intends to make it totally independent rather than answerable in the last resort to his Department, as it is now?

What will be the total cost to the taxpayer of the extra personnel and bureaucracy in the various authorities that he is to establish to discipline the market? Will the estimated £10 billion that could be raised from the sale of British Rail stations be made available to British Rail to invest in its track, rather than simply go to the Treasury, as has happened in previous privatisations? What are the Government's estimates of the investment needed in the infrastructure in the next five years? Does he accept British Rail's chairman's statement that he still needs, even under those plans, at least £1 billion from the Government each year for the next 10 years?

The White Paper will not increase our railway services, but will cut the rail network. It will not modernise the railways but will privatise bits of it. It will not produce new trains but will mean new paint on old trains. It will not integrate our rail and other transport systems but will disintegrate them through competition and selling off profitable parts. Furthermore, it will not help to reduce the massive congestion and environmental damage that a modern railway system in a modern economy can contribute to reducing.

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I shall take as many of those points, one by one, as possible.

Since the election, there have been no delays in bringing forward the White Paper. We made our position clear during the election and the proposals are based on our manifesto. It is nonsense to say that the White Paper is presentation rather than substance. The hon. Member for Kingston-upon-Hull, East (Mr. Prescott) well knows that it contains a great deal of detail, but I am the first to acknowledge that, in working through some of the proposals, it is clear that much more work remains to be done. Naturally, we must have a Bill, which will take a considerable time to pass through both Houses, and it will be possible to go into much more detail then. The White Paper has the full support of the Cabinet, and the entire Cabinet is fully behind the proposals.

May I deal with one of the hon. Gentleman's critical points and return to his rhetoric at the end? He put much emphasis on finance, and I agree that levels of efficiency and productivity in BR have greatly improved thanks to many of the steps that we have taken, as well as those that the BR management board and employees have taken. I have accepted that, and have already said so. However, as most passengers and potential freight operators would acknowledge, that does not mean that there is not scope for much more improvement, which is what our proposals are designed to achieve.

The hon. Gentleman makes a great mistake by putting the entire focus on expenditure. He said that, if only we would spend more, everything would be all right. Substantial investment is and has been going into British Rail. There is now a record level of capital investment of more than £1 billion, which is the highest in real terms since 1962, when the network was much more extensive. I am glad that the hon. Gentleman acknowledges that. We spent more than £1 billion last year, too. The answer to one of his last points is that, as he knows, we operate only within the confines of the public expenditure White Paper, but it is clear that the current White Paper contains considerably more investment.

It is not only additional money that matters but how that money is used to ensure more effective value for money and better services that are more oriented towards the customer. That is what our proposals are designed to do. The hon. Gentleman implies that the Labour party would have spent much more on British Rail, whereas we know perfectly well from comments by the right hon. and learned Member for Monklands, East (Mr. Smith) that the hon. Gentleman would not be permitted to spend more from public resources on British Rail. The hon. Gentleman pretends that he would spend more and criticises us for not spending more, when he would not spend more.

The hon. Gentleman tries to get out of that by saying that private sector finance can be additional. But there too, as I have tried to point out to the hon. Gentleman, and as I have no doubt his right hon. and learned Friend the Member for Monklands, East will point out to him, he runs into a trap. It is perfectly reasonable to have a lease from the private sector if that leasing company is private-sector financed, but if it is public-sector money in the leasing company, or in any borrowing, it is public-sector money borrowed from the private sector that is effectively at risk. That has to be included within the overall public sector expenditure total. At the end of the day, there is a Government guarantee that that money will be repaid. Sometimes the debt is written off, so there is a real cost to the public purse; and there are also high financing charges.

The hon. Gentleman gave France as an example. At present, SNCF has a debt of about £9 billion after a recent debt write-off of £3·8 billion—

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

"So what," the hon. Gentleman says. That is a direct cost to the taxpayer. That compares with a debt for British Rail of about £2 billion.

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

It is not nonsense. The hon. Gentleman clearly does not understand. He would happily remove all controls over public sector finance and let it rip. No wonder the electorate rejected him at the election.

Another factor is the annual interest payments for financing that ever-increasing debt. As a percentage of turnover, the annual interest payment in SNCF is 20 per cent.; for British Rail, it is just over 2 per cent. Somebody is paying the high cost of that high borrowing by SNCF.

If the hon. Gentleman is looking to some of those other financing arrangements as a way out, he is barking up the wrong tree. That is why our proposals will put genuine private finance into the operation, genuinely done.

The hon. Gentleman talked about the conflict between safety and privatisation. I see no conflict because we shall insist on strict safety standards, just as we did on the privatisation of British Airways. There is no reason why such safety standards cannot operate equally on the rails.

The hon. Gentleman talked about the extra cost of the authorities. I can assure him that I intend to keep them as slim as possible. I do not yet have a figure forthe cost, but we shall be developing that during the months ahead.

The hon. Gentleman talked about British Rail stations, and quoted a figure of £10 billion. In terms of the likely return of proceeds in the comparatively near to medium-term future, that figure is way over the top. We must be realistic about the level of proceeds from the sale or leasing of stations, and I do not think that it will be anything on that scale. Finally, the hon. Gentleman talked about the infrastructure over the next five years, and I have already dealt with that.

The old rhetoric comes not from the Conservative but from the Labour Benches. The hon. Gentleman no doubt said the same in 1979 about what privatisation would achieve in the 46 major state industries which have been privatised. We all know what a success those have been and how they are copied by many countries, and I believe that other member states in the Community will be looking with great interest at what we are now proposing for British Rail.

Several Hon. Members:

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Photo of Miss Betty Boothroyd Miss Betty Boothroyd Speaker of the House of Commons

Order. The Front-Bench spokesmen have taken almost 25 minutes in their exchange, and Back Benchers have so far had no opportunity to intervene. I ask them to give me support and ask one or two brief questions, and I ask the Secretary of State to reply briefly. This is a Back-Bench occasion, and I want as many Back Benchers as possible to intervene.

Photo of Sir Geoffrey Johnson Smith Sir Geoffrey Johnson Smith , Wealden

I warmly welcome my right hon. Friend's statement today, representing as I do a constituency which has the worst commuter line in western Europe—[HON. MEMBERS: "No"]—the Uckfield line—as his proposals could attract new financial capital for investment which has been much neglected by British Rail. Can my right hon. Friend give us an assurance that, when bidding for such a franchise, the line will not be fleeced by British Rail?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I can give my hon. Friend that assurance. The rail regulator is designed to ensure fair access to the track and fair competition between those who operate on it. I hope that we will attract more private finance, but that will partly depend on the terms and conditions of franchises. I intend to be extremely flexible in that regard. My hon. Friend will acknowledge that not only private sector finance but different management and skills, added to that which is already in British Rail, will provide a strongly customer-oriented service.

Photo of Nick Harvey Nick Harvey Shadow Spokesperson (Transport)

Will the Secretary of State guarantee that the money raised from franchising will go back into the railways? Will he think again about the long-term objective of allowing the track to pass into the private sector, and instead regard it as an asset that the new freight and passenger operators can use in competition with their road rivals?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

It is not an objective of privatisation that it will yield large proceeds for the Treasury—nor is that expected. That is not its purpose. I indicated that substantial publicly financed capital investment of about £1 billion is currently being undertaken by British Rail. British Rail's external financing limit this year is some £2,000 million. I am not sure that British Rail would get a particularly good deal from the kind of approach that the hon. Gentleman suggests. As to the track authority's longer-term situation, I expect that it will be some considerable time before matters develop to the point at which they should be considered. It is, however, right to include all the possibilities in the legislation.

Photo of Mr Paul Channon Mr Paul Channon , Southend West

I also warmly congratulate my right hon. Friend on a step which I am sure will have all the advantages that he set out in his statement, and which will he widely welcomed. Will there still be control over fare increases on Network SouthEast, and will he undertake that there will be no extra delays in the provision of rolling stock on lines even worse than that mentioned by my hon. Friend the Member for Wealden (Sir G. Johnson Smith)—such as that linking London, Tilbury and Southend?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

One franchise condition will be controls over the maximum level of fares, because clearly there will be continuing public subsidy of any particular franchise in Network SouthEast. It is not possible to answer my right hon. Friend's second question in relation to an individual line, because much will depend on the private sector operators who come forward and the offers that they make in respect of particular franchises. However, it is certainly the intention to get a lot more private sector finance into the system.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe and Nantwich

Will the Secretary of State explain to my constituents—who saw what happened with British Rail Engineering Ltd.—the advantages to them of selling off the assets of a system that is already under-capitalised? They know that for them it will mean loss of income, jobs, and pension benefits, and a much worse system for the customer.

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I have already made a brief mention of pension benefits, which are also spelled out in the White Paper. There will be no loss of pension benefits, as the hon. Lady suggests. In the sale or long leasing of stations, there is considerable potential for better commercial exploitation, which is another good reason for the proposals that we have made. I do not share the hon. Lady's view that a single, monolithic nationalised industry can provide better services than one that embodies all the impetus and management skills of the private sector, competition, and choice. I could quote so many privatisations in which there has been a reduction in real terms in charges—

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

There has of course been some slimming down, because some of the former nationalised industries were extremely inefficient. That is not a good way of making use of the nation's scarce economic resources. Those privatisations also resulted in better services to the customer.

Photo of Mr Tim Rathbone Mr Tim Rathbone , Lewes

Can my right hon. Friend give a reassurance about the protection of small stations—particularly those along major lines—and that one will continue to be able to purchase tickets for the network from any one station?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

If there are to be any station closure proposals, the procedures will be exactly those followed until now. We hope to improve their administration, but the principle will remain entirely the same. In the past 10 years or so, there have been many fewer station closures than there have been reopenings or the provision of new stations. The White Paper contains a paragraph on through ticketing. We acknowledge its benefits, and we will ensure that it is maintained.

Photo of Mr Tam Dalyell Mr Tam Dalyell , Linlithgow

May I ask a question about paragraph 85 of the White Paper? By what means will the Government encourage employees to take a direct stake in the future of the franchised or privatised businesses in which they will work"? Will the issue be discussed with the National Union of Rail, Maritime and Transport Workers at an early stage?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I very much hope that it will be possible to make arrangements to ensure that employees have a direct stake. That has happened in other privatised industries when there have been bids for franchises and private-sector companies have been involved, or there have been buy-outs. We shall develop such arrangements over the months ahead. I wrote to the general secretary of the union today offering talks, which I hope will take place in September.

Photo of Mr David Mitchell Mr David Mitchell , North West Hampshire

I congratulate my right hon. Friend on his progress in fulfilling our election manifesto commitment. How does he propose to ensure the continuation of a national timetable throughout the system?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I am grateful to my hon. Friend. That will be a matter fundamentally for Railtrack, but discussions will take place about the timetable with the franchise operators and, of course, the regulator. When difficulties or disputes arise over the timetable, or over access to train paths generally, it will be for the regulator to resolve them.

Photo of Mr Bob Cryer Mr Bob Cryer , Bradford South

Bearing in mind the example of Tiger Rail—a private company operating on British Rail which has gone bankrupt—how will the Government ensure that, when the franchisees go into liquidation and finish up bust, services for both passengers and goods will continue? Is not the position summed up by the action of the Industrial Bank of Scotland, which refused to provide leasing money for the Leeds-Bradford electrification scheme, saying that it was too dangerous with privatisation around the corner?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I think that the hon. Gentleman has interpreted that last development very strangely and inaccurately.

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I know quite a lot about it, too.

Let me deal with freight and passengers separately. As the hon. Gentleman will know, a number of freight services have been withdrawn in recent years, and I am keen for them to be built up again. I am anxious for more private sector operators to come onto the track as freight operators, either in respect of groups of service or in respect of particular services for their own companies. It will be for them to develop those services.

As for passenger services, where there is a franchising operation, the franchising authority will be responsible first for establishing the financial status of any bidders, and then for monitoring it throughout. If—this is entirely hypothetical, but I am responding to the hon. Gentleman's point—a franchisee runs into problems for any reason, he will be able to return to the franchising authority to discuss the terms and conditions of the contract. In the unlikely event of a failure on the part of the franchisee, it will be for the franchising authority to find alternative operators for the franchise.

Photo of Mr Neville Trotter Mr Neville Trotter , Tynemouth

I congratulate my right hon. Friend on his aim of improving the railways so that they are used more. He will know of my involvement with the British Transport Police Federation. He rightly referred to the need to ensure safety standards; does he envisage a continuing role for that nationwide force, which specialises in dealing with the problems of policing people in the operating environment of a railway, especially at times when terrorist threats are being made?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I am well aware of my hon. Friend's interest in the matter, and I am grateful to him for raising it: he has enabled me to pay tribute to the work of the British Transport police. In the White Paper, we have made it clear that the Government have no plans to end the arrangement whereby the British Transport police are responsible for security and the enforcement of law and order on the railways. We have also said that we shall consult interested parties about appropriate future arrangements. I think that the talks are scheduled for September.

Photo of David Marshall David Marshall , Glasgow Shettleston

Exactly which parts of British Rail does the Secretary of State not intend to privatise? Does he agree that it is a disgrace that ScotRail is not mentioned once in the White Paper? What will happen to it, and, especially, to the highland and rural areas in Scotland? Will the Government make available additional resources for the running of those essential services, or will the railway system end at Edinburgh and Glasgow?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

The hon. Gentleman will find that an awful lot of areas of the country that have rail services are not identified. That is because there is no need to do so on this occasion. However, there is a clear reference to continuing subsidies for socially necessary lines. The current level of subsidy to regional railways is clearly spelt out. It is about £645 million—a very high figure. The hon. Gentleman's point is covered by the proposals we have put forward in the White Paper.

Photo of Mr Timothy Renton Mr Timothy Renton , Mid Sussex

I understand that my right hon. Friend is to leave to the British Railways Board the individual decisions about allocation of capital, but unless the British Railways Board does commit more capital to the modernisation of the commuter lines that run through Sussex, it will be very difficult indeed to attract franchisees to this very good area, simply because the underlying conditions—the infrastructure—will not be

good enough for franchisees to commit themselves to running an efficient and punctual service.

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I know that my hon. Friend will agree with me that there have to be limits to the level of public expenditure in any year. I am sure that he also wishes us to have the right order of priorities. In 1991–92, the grant to Network SouthEast amounted to £345 million, so a very substantial subsidy is going into that network. A large part of it has in the end to be directed to investment. Considerable investment is being made in rolling stock at present.

Photo of Mr Dafydd Wigley Mr Dafydd Wigley Leader and Party President, Plaid Cymru

Is the Secretary of State able to clarify whether franchising can take place on a piecemeal basis for InterCity? Can he give an assurance that the socially necessary passenger services to which he referred will be safeguarded by way of finance if franchising takes place piecemeal in certain areas? Can the Secretary of State guarantee that the InterCity services in Wales between north Wales and London, south Wales and London, and north Wales and Cardiff can be guaranteed under this set-up?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I cannot give guarantees for all time, but I have said that British Rail has been looking at individual services and changing the arrangements between InterCity and the feeder lines. I would not wish to give a guarantee for all time, but we have said very clearly that we expect the national network broadly to be maintained. It is not our intention to franchise InterCity services as a whole. We intend to seek franchises for individual parts of it, the exact arrangements for which will depend on the responses we get from potential bidders.

Photo of Mr Matthew Banks Mr Matthew Banks , Southport

While I welcome this gradual approach to introducing private sector competition, will my right hon. Friend make it clear that, with the creation of the safety executive, private sector operators, as well as British Rail, will be subject to the most stringent safety criteria in order to protect the interests of the travelling public?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

Yes, indeed. I have already said that the Health and Safety Commission has approved proposals that we have made today from the safety point of view. I have asked the commission to make detailed recommendations for the arrangements that we shall be making in due course. It is absolutely crucial, in the interests of passengers and in the interests, if one is a franchisee, of ensuring that one attracts passengers, that, just as with individual airlines, the highest standards of safety are provided—not only for the reasons that we all understand but also from a commercial point of view. It will certainly he crucial that Railtrack operates to the highest safety standards. All those who are providing the track and operating on the railway will have to conform to the stringent standards that will he put forward as a result of the advice that we receive.

Photo of Keith Hill Keith Hill , Streatham

Can the Secretary of State name a single London commuter service that is likely to be affected by his franchising proposals over the next four years? Can he identify any direct benefits at all as a result of his plans for the London railway network, the busiest in the world? Is not this White Paper a monumental irrelevance for the hard-pressed London commuter?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

No, it certainly is not. Every London commuter believes that the service can be improved, so the White Paper is certainly not a monumental irrelevance. I do not want to specify particular lines today, because it will not be possible to start the arrangements for making franchise contracts until the franchising authority is set up, and the franchising authority cannot be set up until we have received parliamentary approval to do so. There is a good deal of time for potential bidders to develop an interest in individual franchises. From approaches that have already been made, we know that a considerable number of companies are interested in taking up the possibilities.

Photo of Alan Haselhurst Alan Haselhurst , Saffron Walden

In view of the relatively poor level of public satisfaction with the railways in the past 40 years, does my right hon. Friend agree that, provided of course that there is proper regulation of safety and timetabling, a better future for the railways lies in the injection of additional and alternative management, new ideas and, hopefully, new finance?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

Yes, I very much agree with my hon. Friend, and I am grateful to him. One of the parallels in transport is British Airways. Its prospects have been transformed in financing, in the way it has expanded its services and in its competitiveness since it was privatised.

Photo of Mr Robert Hughes Mr Robert Hughes , Aberdeen North

Paragraph 36 of the White Paper refers to the east coast main line. Will the right hon. Gentleman confirm the definition of the east coast main line as being Aberdeen-London and London-Aberdeen? Does the White Paper bring the electrification of the Edinburgh-Aberdeen line nearer or push it further away?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

It does not make a difference, because the arguments for the electrification of particular lines and the priorities will depend on the financial and cost-benefit analyses, which would be undertaken anyway. I hope that some franchisees of a particular line may wish to contribute to the track infrastructure investment but, at this stage, it would not be possible to say where, and the franchisees must make their own financial appraisal.

As the hon. Gentleman knows, the reference in paragraph 36 to the east coast main line is an example of the way in which we believe the franchising of InterCity services will take place. We are not giving specific definitions today, for the simple reason that it is important to discover what the potential franchisees want to bid for, and there will have to be a process of negotiation and discussion between them.

Photo of Mr Robert Adley Mr Robert Adley , Christchurch

My right hon. Friend rightly enjoys good will throughout the House, and we hope that his intentions are justified and will produce a better railway service. Will he bear it in mind the fact that 16,000 trains are run daily by British Rail, that for most of the passengers they are an essential part of daily life and that a few more Sock Shops on platforms and a few gaudy carriages will be no substitute for an essential service? Is there any set timetable in his proposals under which British Rail is being forced to dispose of its assets? Finally, will he also bear in mind that perhaps the last and most significant statement made in his place by a Conservative Minister was by Mr. Marples, and it spawned Dr. Beeching?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I am grateful to my hon. Friend for the kind words in his opening comments. Let me reassure him that we are talking of operations which range a good deal more widely than Sock Shops on platforms and gaudy carriages. I am sure that he will agree that there is absolutely nothing wrong with the private sector operations or British Rail itself seeking to market their services better and to find more attractions for their customers.

The timetable is flexible. I have made it clear that I want to pursue a flexible, workable and realistic approach, but I can say that, once the Bill has Royal Assent, we intend to proceed as quickly as possible with the freight and parcels businesses. I expect and hope that such arrangements will be made next year. As for franchises, we need first to set up the franchising authority and then to get the response from the marketplace and, I believe, management-employee bids from British Rail. Effectively, that will mean that we shall be thinking in terms of franchises from about April 1994 onwards.

Photo of Dennis Skinner Dennis Skinner , Bolsover

Does the Minister recall that he said a little earlier that pensions and concessionary fares would be safeguarded? Does he further recall that, when we considered the British Coal and British Rail (Transfer Proposals) Bill, he said that he would not write such safeguards into legislation? Unless he includes provisions governing pensions and concessionary fares in legislation, there will be no guarantee that, if any of the franchises are sold on later to another bidder, those entitlements will be safeguarded. Will he give a guarantee that pension and other entitlements will be written into the legislation, and that there will be no regional pay?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

The hon. Gentleman must await the publication of the Bill. That issue will be discussed when we consider the Bill, but the position is as follows: the pension rights of existing contributors and past employees will be properly safeguarded on the privatisation of British Rail. After privatisation, employees will be entitled to preserve pension rights already accrued in the BR schemes. Alternatively, they will have the opportunity to transfer their accrued pension into a broadly comparable scheme in their new employment.

Photo of Mr Barry Field Mr Barry Field , Isle of Wight

Will my right hon. Friend spell out how the proposals will help to resolve the long-running saga of the privatisation of British Rail's Isle of Wight line from the end of Ryde pier to Shanklin, as every proposal that we have advanced in the past has run into the old buffers of the British Rail management?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I shall have to consider that proposal in detail, but I would think that, under the Government's proposals, the line may well be capable of being franchised and ultimately sold. I repeat that I shall need to look at the details, and stress that, in the end, it will be for the franchising authority to draw up the arrangements for individual franchises.

Photo of Mr Roy Beggs Mr Roy Beggs , East Antrim

The Secretary of State will be aware of the extremely poor rail provision on the west coast of Scotland, and especially to the Stranraer port. What assurance can he give us with regard to the future of links between Stranraer and Glasgow, bearing in mind the fact that, last year, 1·8 million people moved between the Stranraer and Lame ports?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

As I have said, we intend that the national network will be broadly maintained. Whether that line will be a candidate for franchising will depend on whether potential bids come forward from franchisees and on whether proper franchising arrangements can be drawn up.

Photo of Mr Bill Walker Mr Bill Walker , North Tayside

My right hon. Friend will be aware of my interest in these matters. Can he confirm that the integration of bus and rail services in remote areas of the United Kingdom, including parts of Scotland, will be a factor that is taken into consideration?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

Yes, that may well be part of the arrangements for the franchises. I am well aware of the interest that my hon. Friend takes in these matters, and I know that he will agree that there are considerable possibilities for open access for new operators to the British Rail network, in respect of both freight and passengers.

Photo of John Home Robertson John Home Robertson , East Lothian

Can the Secretary of State give any guarantees on the continuity of standards and security of employment for railway staff under the new fragmented franchise set-up? Can he say something about the future of passenger transport executives in local authorities in operating local rail services under the proposals?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

PTEs will remain, and there will be the opportunity to franchise the services to which their subsidies at present apply. I should not wish to say that that will be within precisely the same boundaries as those within which passenger transport authorities currently provide grant. In some cases, there may be groups of passenger transport authorities, for the simple reason that a franchise arrangement may look rather different from the present arrangements. We would expect PTAs to make their subsidy contributions if they wish to do so in the same way as the Government will be making theirs, and we have already had discussions with them.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

Will my right hon. Friend accept the congratulations of many commuters in my constituency who use the Liverpool Street and Fenchurch Street lines every day, who view with great anticipation the possibility of the trains running as frequently and being as cheap and as clean as many buses in our area? Is my right hon. Friend aware that seven of those bus companies have already expressed interest in taking over the Fenchurch Street line because they think that they can make a big success of it? Will he assure my constituency commuters that he will seriously consider selling off the line lock, stock and barrel, possibly to the many commuters who have expressed an interest in buying shares in it?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I am very interested to hear what my hon. Friend has to say about the possible prospects for franchise bids. We certainly look forward to making more of the details about franchising arrangements available over the months ahead as we complete our work on them. I am sure that the people to whom my hon. Friend referred will want to consider those arrangements, and they will then have to discuss them with the franchising authority when we have the appropriate parliamentary consent to go ahead.

With regard to sale, I must state that our first objective is to get the franchises set up. I have already made it clear—and the Bill will make it clear—that outright sale could be a prospect in due course.

Photo of Hugh Bayley Hugh Bayley , City of York

Will the Secretary of State acknowledge that there is already intense pride in the railways in my constituency of York and in many other constituencies? We do not need to break the railways up into regional fragments to install that pride. Given that the bus-building industry virtually collapsed after bus deregulation, what guarantees can the Secretary of State give to the 1,700 men who build railway trains in my constituency that their jobs are secure? What job guarantees can he give to the 3,000 people working at British Rail's eastern region headquarters in York?

Specifically, as 25 men who worked at the BREL works in York in the 1950s and 1960s have died from asbestos-related diseases, and sadly, it is likely that more will die, and given that BR has continued to maintain responsibility for compensating the families of the men who died, even though——

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Speaker of the House of Commons

Order. We must have questions. The hon. Gentleman was in the Chamber earlier when I said that I wanted direct questions to the Secretary of State so that I might call a number of Back Benchers.

Photo of Hugh Bayley Hugh Bayley , City of York

Who will pay compensation in future in such cases? Will it be the track authority or the residual BR operating authority?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I would obviously want to look into the latter point. I imagine that, for some time to come, it will be the BR board. However, that is a very precise detailed point that I would like to look into. Perhaps I can write to the hon. Gentleman about it.

With regard to the hon. Gentleman's request for guarantees for jobs, it simply is not possible for me to guarantee for many years ahead the jobs of people in a manufacturing industry: the hon. Gentleman will be aware of that. The best guarantee is that we continue to expand the railways; that we have a significant level of capital investment, such as we have now; and that, through that operation and through successful completion of the capital investment programme, we attract more customers.

Photo of Mr Peter Fry Mr Peter Fry , Wellingborough

I congratulate my right hon. Friend on establishing a balance between reassuring the public on safety grounds by creating the track authority and on introducing competition by what one can call gradual privatisation. The remarks about possible management and employee buy-outs were encouraging. Will my right hon. Friend go a little further and give them a little more encouragement by saying that they will receive treatment similar to that which is likely to be offered to employees in municipalised bus companies, which are also contemplating privatisation?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

I am grateful to my hon. Friend, and I share his desire that we should encourage management-employee buy-outs. The precise arrangements by which we should do that have still to be completed, but I have noted my hon. Friend's interest. The White Paper fills out a considerable number of the details and all the broad approaches that we will be taking to privatisation and to the Bill itself. However, there is still quite a lot of work to be done on many details between now and Royal Assent.

Photo of Mr Peter Snape Mr Peter Snape , West Bromwich East

Having rightly paid tribute to the contribution of railway workers in the United Kingdom, does the Secretary of State accept that the proposals in the White Paper directly contradict the recent reorganisation of BR, conducted at a cost to public funds of at least £150 million? Does he accept that that damages the morale of those who work in the railway industry? Will the new private owners of railway stations, big or small, be allowed to propose the closure of those stations and the disposal of the assets once they accrue to them?

When will the Government acknowledge the inherent unfairness of the investment criteria that are applied to our railway system compared with our road network? Will the newly privatised lines or services be expected to deliver an 8 per cent. return on investment, unlike the proposed toll roads that he has proposed for the west midlands?

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

On the first question, of course I recognise the benefits that have come from the reorganisation British Rail is not alone in facing the fact that further changes take place in organisations after 10 years of reorganisation. I strongly believe that there are additional benefits to come from these proposals. It will, of course, mean a further process of change for British Rail—I recognise that, and the chairman of British Rail recognises that. I have been very keen to ensure that the transition and the changes are managed properly. That change should take place is a feature of life at present. I have said that I believe that, in terms of morale, there are big opportunities for British Rail staff.

On the closure of stations, it will be a condition of any sale or long lease that the operation of the track and the station aspect will be secured.

On the hon. Gentleman's question about investment, as he will see from the White Paper when he gets a chance to read it, there are quite a number of references to investment in the track. Time forbids me to mention them all, but the view is sometimes around that there is unfair treatment between the level of capital investment in the road programme and on rail. In fact, the level of capital investment in the trunk road network and in motorways this year is about £2 billion. British Rail's extra financing limit is £2 billion.

Photo of Mr John MacGregor Mr John MacGregor Chair, Privileges Committee, The Secretary of State for Transport, Chair, Privileges Committee

The criteria have been referred to. No doubt we will be able to examine that matter in more detail later.

There is also the suggestion that, somehow or other, the playing field is not level, because those who operate on the road pay much less towards the infrastructure than those on rail. The contribution from fuel duty and other vehicle taxes is about two and a half times the annual programme of expenditure on the road construction programme.