Railways

Part of the debate – in the House of Commons at 8:29 pm on 29 October 1992.

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Photo of Keith Hill Keith Hill , Streatham 8:29, 29 October 1992

I first declare two interests —as a member of the Select Committee on Transport and as an officer for 16 years, until the general election, of the National Union of Railwaymen, now the National Union of Rail, Maritime and Transport Workers. I am sponsored by that union.

On the basis of that long connection with the railway industry, I turn immediately to a fundamental difficulty in the White Paper proposals. The Government plan to separate infrastructure from operations as their preferred method of privatisation. The separation of managerial responsibility for track and train operations strikes at the heart of the profession of railway management. It will jeopardise the planning of investment and the operational integrity of the system.

The greatest benefits in terms of financial returns and customer satisfaction arise when the whole of the equipment on the line—track, signalling and rolling stock —is renewed at one time. That policy, known as total route modernisation, has been pursued on the east coast main line and on the Chiltern line where passenger numbers and revenue are growing. Such modernisation schemes depend on close co-ordination between track and rolling stock at the stages of specification and implementation. If responsibilities for track and for rolling stock are separated, as the Government propose, we will face the problem of one party wishing to proceed with modernisation while the other may not be ready to do so.

Even worse. if there are several different operators on a route and one is unable or unwilling to provide improved rolling stock, will the pace of modernisation be determined by the speed of the least innovative operator? The separation of the responsibility for track and the responsibility for operations has the potential to create even more trouble on a day-to-day basis when breakdowns and failures inevitably occur.

There will be disputes about who is to take the lead in sorting matters out, and about the right of an operator to use rolling stock and train crews to minimise passenger inconvenience rather than to do what suits individual operators. Determining who is responsible for shortcomings in services will be time-consuming, bureaucratic and often inconclusive. The scope for buck-passing at the expense of the passenger will be endless.

At present, we at least know whom to blame when something goes wrong, and we often do. It is British Rail. No intensively used passenger railway system in the world separates the management of track and operations in the way proposed by the Government. I invite the Secretary of State, through the Minister, to name any respected professional railway operator or engineer who believes that such a division represents a satisfactory basis on which to run a railway.

The Government have a history of ignoring the advice of professionals and running into trouble. They did so over the poll tax. If they had listened to professional advice on electricity privatisation, they would have avoided the fiasco of the pit closure programme. Will the Minister given an undertaking to take serious heed of those with professional operational experience on the railways? Will he give a commitment that he will think again about the separation proposals in the light of advice he receives?

We have heard a great deal from various speakers in the debate about the extraordinary bureaucratic structure being proposed in the White Paper to replace the single structure of British Rail. Not only will new operators and franchisees face a multiplicity of new bureaucratic structures, each with a finger in the pie, but the chief player in the game will still be the Government in their least encouraging guise, as the Treasury.

The consultation document on passenger franchises makes it perfectly clear that Most passenger services would at present not be viable as stand-alone businesses. In other words, most passenger franchisees will rely on subsidy from the Government doled out by the franchising authority.

The critical issues here will be the length of franchises and the reliability of the subsidies. I know that the Secretary of State is well aware of the significance of those matters, because we discussed them yesterday during his appearance before the Transport Committee. He made a number of important commitments on that occasion. I will spell them out and I hope that they will receive confirmation before the whole House.

As the Secretary of State and the Minister know well, the normal time scale for most railway investment is a minimum of 25 years and often 30 or 40 years. The White Paper speaks of franchises of variable duration. Until yesterday, it was generally believed that the franchises were likely to be on offer for periods of five to 10 years. Yesterday, the Secretary of State referred to franchises of five, 10 or 15 years—and possibly longer.

That point is vital. A fundamental question mark hanging over the Government's proposals in relation to investment is whether franchisees would be willing to engage in the required scale of asset renewal and improvement when they are unlikely to be in business long enough to derive the rewards of their investment. The Secretary of State seemed yesterday to have answered that question, although his answer gives rise to further questions relating to competition when franchisees and/or operators will enjoy such long franchises.

There is an additional and equally important question which arises from the reliability of the level of subsidy initially agreed between the franchisee and the franchising authority. The Secretary of State yesterday appeared to give an important answer to that question. In undertaking a franchise, the private operator will be asking for long-term financing from the banking system. Unless there are firm guarantees about the level of subsidy, there is no way in which the banks can have confidence in such investment.

The subsidy will come ultimately from the Treasury, which operates on the three-year cycle of the public expenditure survey round. In practice, the Treasury often parts with money no more than one year in advance. That is the dilemma between the long-term needs of the railway and the short-term decision-making of the Treasury with which British Rail has long had to wrestle.

The potential problem for the franchisee is how to conclude successful negotiations for the leasing of assets over five, 10 or 15 years when it would appear that his guarantee of subsidy is for three years at the most. The consultation document maintains that the Government intend that the subsidy will be determined in advance for the whole period of the franchise, but it adds the ominous words: both grant and the service specification may be subject to periodic review. Yesterday, the Secretary of State was reasonably emphatic that subsidy would be at a guaranteed level for the duration of the franchises. He was less than explicit on the issue this evening. We seek again from the Minister an explicit guarantee that the subsidy will be at a guaranteed level for the duration of the franchise.

The White Paper raises many more questions than it answers. The Government are embarking on an elaborate process of consultation to try to find the answers to some of the questions. It might have been more sensible to delay the commitment to privatisation until they had sorted out those questions. It would certainly have been more sensible to delay publication and proceedings on a Bill until the Transport Select Committee had completed its work.

The bottom-line question is whether privatisation will lead to the growth of investment which is so desperately needed in railways. Could that objective have been better served by a better-funded British Rail? I am bound to say that, so far, the balance of evidence does not favour the Government's proposals.