Railtrack

– in the House of Commons at 3:30 pm on 13th November 2001.

Alert me about debates like this

Votes in this debate

[Relevant documents: The transcripts of evidence taken before the Transport Sub-Committee of the Transport, Local Government and the Regions Committee on Wednesday 17th October, HC 239-i, Wednesday 24th October, HC 239-ii, Wednesday 31st October, HC 239-iii, and Wednesday 7th November, HC 239-iv, in relation to the Sub-Committee's inquiry into Passenger Rail Franchising and the Future of Railway Infrastructure.]

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Before we come to the main business, I inform the House that there is a limit of 12 minutes on Back-Bench speeches, and also that I have selected the Government amendment.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions 3:34 pm, 13th November 2001

I beg to move,

That this House
deplores the fact that there are discrepancies between accounts given by the Secretary of State for Transport, Local Government and the Regions to the House of his meetings with the Chairman of Railtrack and his discussions with the Rail Regulator relating to the putting into administration of Railtrack, and their accounts of these discussions;
notes the concerns of overseas investors such as those expressed by David Winters, portfolio manager for Franklin Mutual, that 'a bigger risk premium is to be attached to investing in British companies now';
condemns the Secretary of State for failing to inform the House fully;
notes that his failure to set the record straight has further undermined his, and the Government's, credibility;
and calls on the Secretary of State to resign his post before further damage is inflicted on the Government's reputation, both in the business world and the country at large.

I am sure that the House will want to join me in expressing our sympathy for the families of those who died in the tragic air crash in New York yesterday and, indeed, our sympathy for the people of New York. All of us who have any interest in air travel or responsibility for it will realise that this latest incident poses further challenges to an ailing airline industry and should be a matter of concern to us all.

The Secretary of State has been brought to the House today to be called to account for the statements that he has made to the House in recent weeks, to explain why those statements have been disputed by third parties involved and to respond to concerns expressed across the House, as in the statement made on Radio 4 on Friday of last week by Mrs. Dunwoody, who said that there were "gaps" in the various accounts. Above all, the Secretary of State is here to face up to the damage that he has done to the credibility of this Government and to the future of our rail network.

Let us not be under any illusions. For this House, the Secretary of State's failure to account properly to Members for his actions is a matter of deep concern. For the travelling public, it is his failure to protect the interests of the railways that will hurt most.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

No, I will not give way at this stage.

The Secretary of State has been guilty of a breathtaking sleight of hand that has dealt a savage blow to future improvements in the railways, left railway workers robbed of their life savings and damaged the Government's credibility.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

I will make some progress before taking interventions.

The Secretary of State stands accused of failing fully to inform the House of events leading up to the court's decision to grant an administration order for Railtrack. Let me remind the House that only last week, on 5 November, in response to my private notice question, the Secretary of State said that, on 25 July, the chairman of Railtrack had told him that, without Government financial assistance, on 8 November he would not be able to make the statement that Railtrack was a going concern. The very next day—Tuesday 6 November—the chairman of Railtrack disputed that, saying that that was not his recollection of the meeting. Indeed, he said, "It is not true".

Railtrack has now passed over copies of the notes of that meeting, and other relevant documentation, to the Financial Services Authority. Will the Secretary of State now commit to placing copies of his Department's note of that meeting in the House of Commons Library, and will he make a copy available to the FSA?

Sadly, that was not the only incident last week when the Secretary of State's account of events to Parliament was challenged by a third party.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

I suggest that the Under-Secretary, a former Whip, pays a little more attention to matters relating to people giving statements to the House and the veracity of those statements.

On 5 November, I asked the Secretary of State if he had threatened the Rail Regulator with legislation if he used his powers to intervene in Railtrack. The Secretary of State replied that "there was no threat". Yet on Thursday last week, the Rail Regulator, Tom Winsor—in evidence to the Select Committee on Transport, Local Government and the Regions—stated clearly that, in a meeting on 5 October, the Secretary of State had told him that if he, the Rail Regulator, used his powers to intervene in Railtrack, the Secretary of State would introduce legislation to direct him.

As the regulator said, he had to pause

"to consider whether I had really heard what I had just heard."

Not only was the Secretary of State going to direct the Rail Regulator in his powers to order an interim financial review, but he was going to direct him in all his powers: that is, take away his independence.

The Secretary of State says that he was not threatening the Rail Regulator. I was not asking the Secretary of State if he had bullied the regulator to make him cry, or if he had shut him up in a cupboard and thrown away the key. I was asking if he had told the Rail Regulator that he would legislate if the regulator intervened. The correct answer was yes; the Secretary of State, to all intents and purposes, said no.

Photo of Louise Ellman Louise Ellman Labour/Co-operative, Liverpool, Riverside

Is the hon. Lady aware that the Rail Regulator also told the Select Committee that he was amazed that Railtrack had bypassed the normal procedures, and had in fact not come to him for a settlement?

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

The hon. Lady might also like to note that the Rail Regulator told the Select Committee that what the Secretary of State had done put under threat Virgin projects for the purchase of tilting trains for the west coast main line—a line which I know is of particular interest to the hon. Lady—and for its new country networks, and had put under threat the independence of the Bank of England as well. Perhaps the hon. Lady would like to consider that before she intervenes in future.

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation

I wonder if we might establish one fact at the start of the debate. Does the hon. Lady believe that Railtrack made a sufficient contribution to rail safety and improved reliability of services in return for the hundreds of millions of pounds of public subsidy and billions of pounds of access charges that it received?

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

If the hon. Gentleman would like to examine the record of rail safety under public sector ownership and following privatisation, he will find—[Hon. Members: "Answer the question."] Just listen. He will find that, notwithstanding the tragic crashes that did occur after privatisation, at Hatfield and Paddington in particular, the safety record under privatisation actually improved.

Photo of Chris Grayling Chris Grayling Conservative, Epsom and Ewell

Is my hon. Friend also aware that the Rail Regulator, in his evidence to the Select Committee, appeared to contravene the statement made by the Secretary of State that Railtrack was insolvent on Friday 5 October?

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

Indeed, and it seems that Ministers find it a little difficult to define the issue of insolvency. I note that yesterday, in another place, Lord Falconer had to apologise because there was a period when the New Millennium Experience Company, running the dome, had been insolvent when, as I understand it, he had said that it was not insolvent. It is an interesting contrast because, for the Government's pet project of the dome, they overlooked a period of insolvency pending a few grants, but for Railtrack, they could not wait to pull the plug, regardless of whether it was really insolvent.

After the Secretary of State had made that reference in the House to the fact that there was no threat to the Rail Regulator, the Prime Minister's official spokesman, when challenged on the Rail Regulator's response to that, said that he was simply setting out "the logical consequence" of the Government's decision. Well, if it was a logical consequence, why did he not tell the House? We can only assume that he did not want Ministers to know what he proposed to do to the Rail Regulator and took great pains to keep Members in the dark. He must now explain that failure to inform the House. Moreover, he must tell the House his intentions regarding the Rail Regulator. Will the Rail Regulator retain his independence, or will the threatened legislation go ahead?

As I have said, that question has implications for more than the railways. The former gas regulator, Clare Spottiswoode, said this morning that

"the way things are going it's quite difficult to know what might happen because if Stephen Byers did threaten"—

[Interruption.] When it gets difficult, no Labour Member wants to listen and hear what will actually happen—

"emergency legislation and got his way by doing that, and it's not quite clear exactly what other, sort of, things might be got through, through threats rather than through the normal due process of the law. I think this is a very serious accusation".

How does the Secretary of State answer that accusation?

I am sorry to say that these are not the only examples of the Secretary of State's failure. On 15 October, he told the House that the Government had

"met all our legal obligations regarding payments to Railtrack."—[Hansard, 15 October 2001; Vol. 372, c. 959.]

On 5 November, in response to my hon. Friend Mr. Hawkins, he said:

"The decision was taken on 5 October not to provide additional funding for Railtrack."—-[Hansard, 5 November 2001; Vol. 374, c. 28.]

Yet a payment of £162 million that was due to be paid on 1 October under an agreement reached with the Rail Regulator in January was withheld by Government—four days before the Government pulled the plug on the company and two days before Railtrack staff took their dividends in the form of additional shares.

Why was the money withheld? It was withheld supposedly because the Office for National Statistics could not decide under which heading it should appear in the national accounts. Forget the substance—just worry about the presentation.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Will the hon. Lady confirm that, had she been in the Secretary of State's position, she would have paid the money? Will she now commit the Opposition to reprivatising the successor to Railtrack?

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

I have news for the hon. Gentleman—he should watch what the Secretary of State does to the new Railtrack. The right hon. Gentleman has invited bids from the private sector, so Railtrack may well end up back in the private sector once again. That may wipe a few smiles off Labour Members' faces.

The real answer is that the Government were playing fast and loose with Railtrack, stringing the company along. At the end of September, the company still believed that the money would be paid, but the Government did not want to pay the money because it might have jeopardised their case for administration.

Will the Secretary of State confirm that officials in his Department and/or officials in the Treasury put pressure on the Strategic Rail Authority not to make that payment on 1 October? Will he explain why, as of 30 October, the Government were willing to make that payment? Will he publish the correspondence between his Department and the SRA relating to negotiations on the proposed company Renewco?

Those are not idle questions. The case for the administration order put before the judge on 7 October raises several questions to be answered by the Department. Did the Secretary of State, through the statement made on his behalf by the Director General of Railways, explicitly tell the court on 7 October that the Rail Regulator had the power to intervene to bring forward an interim financial review, which could have brought forward funding for Railtrack, thus changing the company's financial position and its future solvency? Did the Secretary of State—

Hon. Members:

Give way!

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Order. The hon. Lady is not giving way.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

Did the Secretary of State, through the Director General of Railways, explicitly explain to the court that he had decided to introduce emergency legislation to remove the powers of the Rail Regulator?

During that case, much was made of the evidence of Arthur Andersen on the financial status of the company, yet Arthur Andersen says:

"It is not clear to what extent the forecast funding requirement could be reduced through careful cash management", adding that, "we have no information" regarding the company's ability

"to raise additional funding via alternative sources."

The Government knew. They knew that the company was preparing plans to reduce costs. They knew that the Rail Regulator could bring forward financing through an interim financial review. They knew that the company had not been given the chance to explore alternative sources of funding. They knew that they were not going to give the company that chance, because they had decided to pull the plug on Railtrack a long time before.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody Labour, Crewe and Nantwich

Did the hon. Lady read the Rail Regulator's evidence carefully, especially the part where he said that Railtrack had not asked for an assessment, and that the company only rang him on the Saturday night to ask whether it would be possible for him to carry out an assessment in 24 hours, completing it on the Sunday and finding what the chairman described as "millions and millions" of pounds in cash by Monday morning?

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

As one in the hon. Lady's position knows well, the timetable was such that at that stage the regulator was not able to produce an interim financial review. However, she also knows—or should know—that during the whole of the summer, Railtrack was negotiating with the Government on restructuring the company and introducing a new company. The Government kept it thinking that that was going to be permitted and that money would be forthcoming, until 5 October when the chairman was called in.

Photo of Gerald Howarth Gerald Howarth Conservative, Aldershot

Has my hon. Friend noticed that in the summer the accounts of Railtrack were signed off and both the accountants and directors certified that it was a going concern? They had to certify that it would be a going concern for the whole of the coming year. There must have been agreement and letters from the Government offering comfort. Would it not be interesting to see those and to know why the Government ratted on them?

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

My hon. Friend makes a valid point. It would be interesting to see all the documentation that passed between the Government and Railtrack on this issue.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

No. I want to make some progress.

There is no doubt that in the summer the Government had already decided on other plans for Railtrack. Let me take hon. Members back to June—[Interruption.]

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Order. Let the hon. Lady speak.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

On 6 June, in a radio call-in, the Prime Minister told listeners as regards the renationalisation of Railtrack:

"I don't know that it would be very sensible. If we took it back, it's not just the share price we would have to pay for, we would also have to pay their debt back as well."

Indeed, the Secretary of State himself admitted at the Labour party conference this year—just four days before he pulled the plug on the company—that the Government had received legal advice, influenced by the Human Rights Act 1998, that it could not buy back Railtrack shares at the current depressed price. Acquisition of the company's equity on top of its outstanding debt would cost the Government between £7 billion and £8 billion. I wonder when the Government asked for that legal opinion.

Clearly, at that stage the Labour party was thinking about renationalisation, but compensating shareholders was going to cost too much. So, the Secretary of State—

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

Will the hon. Lady confirm that it is the Conservative party's policy to compensate shareholders to the tune of between £7 billion and £8 billion?

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

Shareholders are entitled to compensation based on the value of the company. [Hon. Members: "How much?"] Labour Members all want to know how much, but perhaps they would also like to know that those were not my words but those of the Prime Minister.

Several hon. Members:

rose

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

I will not give way.

The Secretary of State and the Labour party were thinking about renationalisation some time ago, but compensating shareholders would cost too much. So the right hon. Gentleman—ever keen to help the new Labour project—devised a cunning plan. He knew a way of renationalising without compensating shareholders. He would drive the company to the wall, put it into administration and renationalise on the cheap. How else could he explain the way in which he and the Treasury held out on the discussions on the new company, Renewco? How else would he explain holding back the payment of £162 million that was due on 1 October, keeping the Strategic Rail Authority in the dark and not meeting its chairman from June to this day, as far as I am aware, to discuss his plans for Railtrack? How else does the right hon. Gentleman explain that he took such great pains at the beginning of April to state—a statement that he has relied on consistently since the company was put into administration—that the Government stood behind the network, not any company? How does the right hon. Gentleman explain keeping the Rail Regulator in the dark and then stopping him in his tracks when he suggested that he could help the company out?

Photo of David Laws David Laws Shadow Spokesperson (Defence)

Is the hon. Lady aware that the head of the Financial Services Authority gave evidence to the Select Committee in which he confirmed that evidence from Railtrack has now been lodged with the FSA? He has therefore written to the Secretary of State and the Department asking for a response. Does it makes sense for the House to make a judgment on those issues and the Secretary of State's future without even bothering to read the report that the FSA is now going to prepare?

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

We are not short of accusations against the Secretary of State which we can use to make a judgment on him, notwithstanding the report that will be prepared by the FSA. The plan is clear; it was devised by the Secretary of State and the Treasury was complicit in it. But like all Baldrick's cunning plans, it does not look so clever now. It means delayed or cancelled projects; phase two of the west coast main line has been delayed; likewise Thameslink 2001 and improvements to South Central.

Several hon. Members:

rose

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

No, I am not giving way any more.

It is clear that the plan of the Secretary of State means two years of chaos on the railways and delay in improvements. Indeed, the Prime Minister predicted that on 6 June, when he said that it would

"probably take two years before we sorted everything out and, in those two years, we would have the railways in a state of paralysis and not be able to start the investment programme that is there now ready to go."

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

I am glad that I carry some small influence. Is my hon. Friend prepared to go into detail about the implications of that sad saga for the west coast main line, which is critical to the economic future of the north-west of England?

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

I should tell my hon. Friend that I never could resist a more mature man.

The plan has indeed delayed the second phase of the west coast main line project; I know that that is a cause that my hon. Friend has valiantly championed. As the Rail Regulator made clear in his evidence to the Select Committee, it has caused extreme problems for Virgin in the purchase of tilting trains. Indeed, the Government can kiss goodbye to the subsidy that they were going to receive as a result of those developments.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

No. The hon. Gentleman should take that as a compliment; I obviously do not think that he is more mature.

The plan of the Secretary of State means increased cost to the taxpayer as the private sector walks away from investment or demands more government guarantees or a higher price for that investment.

Several hon. Members:

rose

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Order. Do not drown the hon. Lady out.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

Thank you, Mr. Speaker.

Claire Spottiswoode, the former gas regulator, said this morning when talking about Government intervention in Railtrack that

"that would increase the cost of raising capital in the markets. And, of course, if the cost of raising finance for Governments goes up, then that affects all of us through increased taxes."

The right hon. Gentleman's plan means that small shareholders, like Edith Knowles, aged 81, will lose their life savings—[Interruption.] It is a sad day when members of the Labour party are not interested in the problems faced by elderly people in this country. Edith Knowles from Preston has told how she paid £13,000 over the years for Railtrack shares which she hoped would cover any nursing care that she might need. She says:

"Now all I have left is my pension. We aren't the fat cats Mr. Byers and MPs think we are."

The Secretary of State's plan means that the Government could end up in the courts. He has let the railways down; he has let passengers down; he has let railway workers down; he has let taxpayers down; he has let savers down; and he has let the Government down.

The Secretary of State stands accused of failing to inform the House; of holding promised funding back from the company; of stringing the company along by talking about the future, while he knew that he was going to pull the plug on it; of letting Railtrack staff take dividends as extra shares, when he knew that the shares would soon be worthless; of increasing the cost to the taxpayer of future investment in the railways; and of causing delay to the improvements in the rail infrastructure. The Secretary of State stands accused. There is only one verdict for the House to return: guilty as charged. 4.1 pm

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

'recognises that many of the problems of the railways stem from the years of underfunding of the industry by the previous Conservative Government and the shambles of their rushed and ideologically driven privatisation of Railtrack;
welcomes the decisive action that Ministers have taken in regard to Railtrack which will be welcomed by the travelling public;
congratulates the Government for developing contingency plans for the industry as soon as it was told of the company's plight;
rejects the policies of the Opposition, who would have offered the company a blank cheque and even now wish to pay over £1bn to compensate shareholders;
and welcomes the work of Ministers in developing positive policies to take the industry forward in terms of a successor to Railtrack and to put the interests of passengers first.'.

At the outset, I associate myself with the remarks of Mrs. May in relation to the tragic accident in the skies over New York yesterday. I am sure that the sympathies of the entire House go to those affected, their families and their loved ones.

We are witnessing a Tory smokescreen—an attempt to hide the fact that the Labour Government, and I as the responsible Secretary of State, have taken action against the failed privatisation that was Railtrack. The travelling public know that Railtrack was a failure. The City knows that Railtrack was a failure. The railway industry knows that Railtrack was a failure. The only people who regard it as a success are the architects of Railtrack: the Conservative party.

The hon. Lady made a number of allegations and posed some questions this afternoon. It is interesting to note that they are the same allegations and the same questions raised by people who have a vested interest. There are those who seek compensation from the Government. Those shareholders are now clearly aided and abetted by the Conservative party. The Government's position is clear. We believe, as the Prime Minister said last week, that shareholders should get what they are entitled to, but that there should be no new taxpayers' money to compensate them.

We now know that Railtrack has said that it wants £3.60 a share, guaranteed by the Government, regardless of the company's assets or liabilities. That would mean more than £1 billion of taxpayers' money being used to compensate shareholders for a bad investment. No doubt pressure will continue to try to force the Government to pay for the company's incompetence, but we are clear: investments can go down, as well as up. As we said on 2 April, we stand

"behind the rail system but not behind individual rail companies and their shareholders".

Photo of Douglas Hogg Douglas Hogg Conservative, Sleaford and North Hykeham

Will the right hon. Gentleman tell the House what he has so far refused to tell me in reply to my written question: when, after 1 August, did his Department receive advice from the Treasury that it was unlikely that public funding for Railtrack would be approved?

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

The issue that the right hon. and learned Gentleman raises concerns the relationship between different Departments. The position is clear. I took the decision on 5 October based on the advice that I had received, including advice from my colleagues in the Treasury.

Photo of John Redwood John Redwood Conservative, Wokingham

On 3 July, the right hon. Gentleman told the House that it would cost £6 billion to set up a not-for-profit company, £2 billion to pay the shareholders and £4 billion to pay the debt holders. We know that he has decided to mug the shareholders and rob them of the whole £2 billion, but is it also his intention to rob the bond holders? Should they not be told, or does his scheme cost £4 billion plus the cost of sorting out the mess?

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

The right hon. Gentleman knows, because I have made the statement in the House before, that on 25 July circumstances changed dramatically. That was the day on which the chairman of Railtrack, John Robinson, came to see me and outlined the position as he saw it. I will say something specifically about 25 July in a couple of minutes because the hon. Member for Maidenhead raised some serious points about that discussion.

The Conservative party's difficulty with the issue is that Railtrack was the last throw of the privatisation dice when, in the dying days of the Major Government, it was floated on the stock market. Helpfully, the flotation was subject to a report by the Public Accounts Committee during the previous Parliament, when it was chaired by David Davis, who is now chairman of the Conservative party. That report, the twenty-fourth report of the Public Accounts Committee, makes valuable reading and I commend it to Opposition Members.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

No, because I want to address this particular issue, but I will be more than happy to give way to the hon. Gentleman later.

The key finding in relation to the flotation of Railtrack that emerged from the Public Accounts Committee's report—bear it in mind that it was rushed through ahead of the 1997 general election—was:

"The timing of the sale was a factor in the poor value achieved, and the Department themselves acknowledge that the large increase in Railtrack share price since flotation was because it had been undervalued and sold in haste."

The report goes on to disclose the scale of the loss to the taxpayer.

Several hon. Members:

rose

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I want to make this point, but I will give way in a minute.

The report continues:

"The share price of Railtrack quadrupled in two and a half years with the result that the taxpayer received less than £2 billion from the sale of shares compared with the company's current valuation of nearly £8 billion."

At the time of the report, there had been a £6 billion loss to the taxpayer.

Photo of Martin Salter Martin Salter Labour, Reading West

Will my right hon. Friend explain to the House, in addition to the staggering increase in the share value of Railtrack after privatisation, exactly how much money has been paid to the shareholders and directors? The information that I have suggests that about £700 million has been paid to shareholders and £10.4 million has been paid in bonuses to Railtrack directors. Are those figures correct?

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

My hon. Friend is absolutely right. During the period of privatisation, some £700 million was paid in dividends to shareholders and some £10.4 million to directors by way of remuneration.

Several hon. Members:

rose

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

Members of the Select Committee will have an opportunity tomorrow afternoon to quiz me at great length, so I shall give way to Michael Fabricant.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

Will the Secretary of State answer the question of my right hon. and learned Friend Mr. Hogg, and say precisely on what date he was advised by the Treasury that funding would not be made available to bail out Railtrack?

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I have answered the question, although hon. Members might not like the answer. The decision was mine, taken on behalf of the Government, on Friday 5 October. That was when the decision was taken by myself as Secretary of State. It was a decision for me to take on behalf of the Government. That is the situation. I have explained it to the House before.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

On a point of order, Mr. Speaker. I think that the Secretary of State has misunderstood my question. I asked him not when he made the decision, but when he was advised.

Photo of Michael Martin Michael Martin Speaker of the House of Commons

The Secretary of State is entitled to misunderstand questions.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

If I can have a second chance of explaining the matter to the hon. Gentleman, he may find it beneficial. I know that he has not had experience of government and is unlikely to get any, but the reality is that, in government, there are Secretaries of State who are responsible for taking decisions. I was responsible for taking the decision in relation to Railtrack.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I thank my hon. Friend very much. I took the decision on Friday 5 October.

Several hon. Members:

rose

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I want to make some progress, as many hon. Members wish to speak.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

Perhaps I can give the Secretary of State some assistance in this matter. Will he inform the House whether he had any discussions with the Treasury, or whether any of his officials had discussions with Treasury officials, in which it was indicated that funding would not be forthcoming, prior to 28 September, the date on which The Stationery Office published the administration order?

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I have to say that the question of the printer's mark of 28 September[Interruption.] That is the issue that the hon. Lady raised. I have already explained that the nature of government is such that there is advice that Ministers receive, and decisions were taken on Friday 5 October. That is the situation. [Interruption.]

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Order. The House should allow the Secretary of State to answer. It is unfair not to do so.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

In relation to 28 September, I explained to the House last Monday that that was a printer's mark, and not a fax, as some people suggested. It was a printer's mark of the sort that The Stationery Office often uses. The issue was raised by the hon. Member for Maidenhead. I am seeking to outline the circumstances. I shall answer the allegations in a minute.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

I am grateful to the Secretary of State for giving way a second time. I did not ask him about 28 September and the printing of the document. I asked him whether he or any officials in his Department had had any discussions prior to that date with Ministers or officials in the Treasury at which it was indicated that funding for Railtrack was unlikely to be forthcoming from the Treasury. It is a simple question—is the answer yes or no?

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

The situation is this, as I have explained to the House on two previous occasions: there were two options that were being worked up. One was a situation of a decision being taken to put Railtrack into railway administration. Of course, in all those discussions, various Departments would have been involved. Alongside that were the restructuring proposals being made by Railtrack, which were being actively considered at the same time. We had two programmes of work that went alongside each other, with a decision taken on Friday 5 October. I hope that that makes it perfectly clear for Opposition Members.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

No; I want to make some progress.

I am trying to explain the background to Railtrack's formation, because there is a very important message here about how the Conservatives use public money to prop up their own approach to public services. I have already outlined the useful finding from the chairman of the Conservative party that the shares were undervalued by some £6 billion. But the situation is worse than that, because to ensure that the flotation was a success, £1.4 billion of debt owed to the taxpayer was written off by the Conservative Government. In addition, £69 million of profit, earned while Railtrack was in public ownership, was held back from the public, but then given to shareholders by way of a dividend. Taxpayers' money was recycled as profit for Railtrack, sprinkled like confetti among shareholders—yet not one of them was a shareholder at the time when that profit was made.

It is also enlightening—it shows the climate of the times under the Conservatives—to consider how the shares in Railtrack were marketed at the time of flotation. One financial adviser produced a pamphlet that stated:

"Railtrack is essentially a property company and the land that Railtrack will own could be regarded as one of the most valuable pieces of real estate in the United Kingdom."

This is the marketing for Railtrack. It refers to these sites as being ripe for exploitation, with retail developments at mainline stations being able to compete with major department stores up and down the country. The pamphlet then described how stations would have

"a captive audience of passengers who are all potential customers . . . This waiting time is valuable selling time for retailers and food providers".

That was the sales pitch for Railtrack flotation: to capture passengers at railway stations that have been redeveloped as shopping centres.

The hon. Member for Maidenhead has made—

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

No. I want to address the thrust of the hon. Lady's charges this afternoon, because they are important and significant. I want to address these allegations, because that is the basis on which this debate is being held.

The hon. Lady has not addressed the important policy issues concerning my decisions. Instead, she fell back on innuendo, smear and allegations. So, today, let us cut through all that and look at the facts. I want to get on to the substance of the allegations that have been made.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

Is the right hon. Gentleman saying to the House that the evidence given by the Rail Regulator to the Select Committee on the Treasury was innuendo, smear and allegation? That is what he has just implied.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I shall come to the Rail Regulator. It was the hon. Lady's comments to which I was referring. I shall address the position of the Rail Regulator specifically. Before I do so, I want to address the issue raised by the hon. Lady about the meeting that I had on 25 July.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I shall not give way, for the simple reason that I want to put on the record the facts in relation to the allegations made by the hon. Lady. I hope that the House will indulge me if I do not take any interventions while I put on record the truth of the situation.

The first allegation is in relation to the meeting between me and the chairman of Railtrack held on 25 July. I am aware that there has been some disagreement about what was said at that meeting. In my earlier statements to the House, I sought briefly to describe those discussions. Let me now set out the events in a little more detail.

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Order. The Secretary of State is not giving way, and when I rise, I expect hon. Members to be seated. Could we have some order in the House? The Secretary of State is entitled—[Interruption.] The rabble is not just over there. The Secretary of State is entitled to a hearing.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

On 25 July, Mr. Robinson discussed with me a range of issues about Railtrack, including its management and the difficulties that it was being presented with by the present regime of regulation. He outlined to me in general terms the seriousness of Railtrack's financial situation, making it clear that the position was far worse than he had first thought. He spoke to me about needing a soft letter of comfort from the Government by the autumn, before being able to access existing banking facilities. If Railtrack was unable to access those facilities or receive extra financial assistance from the Government, it was clear that, on 8 November, when Railtrack was due to give its interim results, it would be unable to make the critical statement that it was a going concern.

At the same time, Mr. Robinson suggested that my officials have further discussions with Railtrack's advisers, Credit Suisse First Boston, to consider in more detail the state of the company's finances and management, and a series of proposals for restructuring the company and the regime of regulations. Initial discussions took place between my officials and Railtrack's advisers on 27 July, and the message was stark. It was clear that the viability of the company was at issue. That is the sequence of events, and I hope that that clarifies the position for the benefit of the House.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I want to put on the record the specific points in relation to the series of allegations that have been made.

The second allegation relates to the so-called threats to the Rail Regulator, Tom Winsor. The hon. Lady alleges that I made threats to the Rail Regulator; she did so again today. Now that the Select Committee has helpfully made the transcript available, Members will see clearly that the Rail Regulator at no stage said that he had been threatened. I ask Members to read the transcript, which is here. That was put to him and that was the position.

I want to get on the record the truth of the situation. The hon. Lady made the allegation. I made it clear to the House on Monday 5 November that there were no threats. The first people to raise the issue of suspending the regulator were Railtrack's own advisers. I also made it clear to the House that, in my meeting with the chairman of Railtrack, we covered how the regulator would deal with those matters. Having taken the decision that we could not pour unlimited amounts of taxpayers' money into Railtrack additional to that which had already been agreed, it followed that, if necessary, we would introduce legislation to ensure that that objective was achieved. That was communicated to the regulator in response to a point that he raised with me.

I made a factually accurate statement that I had the necessary authority to introduce legislation if need be. It would, of course, have been for both Houses of Parliament to consider the merits of such legislation. There were no threats. Just imagine the outcry there would have been—[Interruption.] No threats. Imagine the outcry there would have been had I refused to be open with the regulator or had I misled him about the Government's intentions. There would have been cause for complaint and cause for the Opposition to raise the matter in the House, but that was not the case. It was raised in discussion by the regulator, and I gave him a factual reply.

Several hon. Members:

rose

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I am not giving way, because I want to get points to do with the allegations on the record.

Most importantly, the regulator himself, in his evidence before the Select Committee, clearly did not feel threatened in any way. As he told the Select Committee, for him it was business as usual. It was clear that he did not feel that his independence had been undermined and clear that he retained his independence unless and until it was removed by Parliament.

Several hon. Members:

rose

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Order. The Secretary of State has said that he is not giving way.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

The regulator told the Select Committee that he informed the chairman of Railtrack on the evening of Saturday 6 October that if an application was made to him for an interim review, it would be considered and it would be possible for the regulator immediately and publicly to announce that he had begun such a review. That all took place on the evening of Saturday 6 October, the evening before the High Court considered my—

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

On a point of order, Mr. Speaker. I have a transcript here, which I understand is—

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

Yes, I am a shareholder in Railtrack, Eurotunnel and First Group.

I have in my possession a transcript, which I understand was not made available to the public. I am not sure of its status, but it is not the evidence taken by the Committee.

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Order. Those are matters for debate. Hon. Members can rebut what the Secretary of State has said.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

If the hon. Lady is challenging the accuracy of the transcript, that is a matter for the Select Committee.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

I am most grateful to the right hon. Gentleman. I shall not enter into the semantics of whether it was a threat or a promise to act. The evidence that we took from the Rail Regulator was that his ability to intervene and apply for an interim review was completely neutralised. Why did the Secretary of State take away the independence of the only person able to protect the investment in Railtrack?

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

Two issues are important here. First, only this House and another place could take away the independence of the regulator.

Secondly, it is alleged that I somehow took away the regulator's independence so that he could not act. The evidence given by the Rail Regulator is precise on this point. On Saturday evening, 6 October, the regulator is phoned by the chairman and the chief executive of Railtrack. They ask him, "Can you conduct an interim review?" He says, "Yes, I can." That is what the Rail Regulator said last week in evidence before the Select Committee. The Rail Regulator told the Select Committee that, if an application were made to him for an interim review, he would consider it and

"it would be possible . . . immediately and publicly to announce" that he had begun that review.

The following day, my petition was heard in the High Court. No move was made to oppose my petition for railway administration.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

As ever, the Secretary of State has been careful in choosing his words and in quoting the Rail Regulator. Will he confirm that the Rail Regulator went on to say to the Select Committee:

"but I did not think it would be possible for me to complete it in 24 hours over a weekend"?

That is what he had told the chairman of Railtrack.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I do not know who advised the hon. Lady to put that quote in the public arena, but the truth is this: had Railtrack applied for a review on the Saturday evening, which is what the regulator indicated that he would be prepared to accept, then—this is the crucial point—on the Saturday evening, the regulator would have made public the fact that the review had begun. On the Sunday afternoon, the High Court judge, knowing that a review had commenced, would probably not have granted the petition. That is the situation.

However, on that Sunday afternoon, Railtrack attended the High Court with counsel, and I presented my petition. Railtrack did not oppose the petition. Had Railtrack refused—

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

For the benefit of Opposition Members, I cannot refuse an interim review. On the evening of Saturday 6 October, the Rail Regulator indicated to Railtrack that he would be prepared to conduct a review, or consider it, if an application were made. No such application was made by Railtrack.

Photo of Mr Andrew Bennett Mr Andrew Bennett Labour, Denton and Reddish

Does my right hon. Friend accept that it seems incredible that Railtrack, knowing immediately after the Hatfield disaster that it might have financial difficulties, did not consider going to the Rail Regulator and asking for a review, but preferred to try to negotiate with the Government? If Railtrack was really concerned to protect its shareholders, should it not at least have approached the regulator before that date, almost 24 hours before the order was made?

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

Those are issues for Railtrack rather than for me, as Secretary of State. People will no doubt want to raise questions about the conduct of Railtrack.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

No, because I want to put on the record exactly what happened, in answer to the serious allegations that have been made by the hon. Member for Maidenhead.

The final point that the hon. Lady made was that, somehow, I had kept my approach, and the possibility of legislation, secret from the House. That is a serious allegation. I have made no secret of our position. It was disclosed in a letter from our financial advisers, which formed part of our evidence to the High Court on 7 October. That same letter was one of a number of papers placed in the Library of the House on 23 October—so much for keeping it secret. It was placed in the Library on 23 October—a big secret. More important, on 2 November, the shadow Minister for Transport, Mr. Pickles, received a parliamentary reply from my right hon. Friend the Minister for Transport drawing his attention to the fact that the papers had been placed in the House of Commons Library. [Interruption.] No, it was not after the event. Clearly, there was a breakdown of communication between the beauty and the beast—[Hon. Members: "Who is the beauty?"] It is a close-run thing.

There was clearly a breakdown of communication because last Wednesday 7 November, the hon. Member for Maidenhead said about the possibility of introducing legislation that it was a stark new piece of evidence. It had been in the House of Commons Library for over a fortnight. That is the reality. Therefore, the position in relation to the regulator is this: open and honest, no misleading of the regulator and the House kept fully informed of the Government's position.

Photo of Eleanor Laing Eleanor Laing Shadow Spokesperson (Education)

Is the Secretary of State in effect saying that he values the independence of the Rail Regulator, and that he will protect in perpetuity that independence? It is not what the Rail Regulator appears to have understood the Secretary of State to say when he said:

"The Secretary of State said to me that if there were an application for an interim review he had the necessary authority to introduce immediate legislation to prevent the review taking place."

That is a threat to independence. Is the Secretary of State now saying that he will protect the independence of the Rail Regulator?

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

The independence of the Rail Regulator is a matter for the House. It is as simple as that. Conservative Members will be aware of that. That is the situation.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

What happened is that, in conversation, it was raised by the regulator—

Photo of Brian H Donohoe Brian H Donohoe Labour, Cunninghame South

I make just two points. First, did the regulator not say last week to the Select Committee that Railtrack at no time had ever approached him, and indeed, he felt that he was being cut out of the loop? Secondly, Railtrack thought that the Government were a soft touch and hoped to get the money out of the Government because it knew full well that it was never going to get it out of the regulator.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

As a member of the Select Committee, my hon. Friend will be aware of the evidence that was given last week. I think that he has accurately stated the regulator's position.

One other major allegation was made by the hon. Member for Maidenhead—

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

No. I have given way several times to the hon. Lady. I want to go on to that particular point. I want to put on the record the response to her very important allegation that the £162 million that was legally due to be paid on 1 October was held back by the Government. I want to be clear about that, too.

As part of the April deal, £337 million was due to be paid on 1 October, which the Government were legally obliged to pay. That was paid in full, every penny, on 1 October, but in addition, in April, all parties accepted that they would use their best endeavours to establish a special purpose vehicle called Renewco. It was recognised that it could be only on the basis of best endeavours because the arrangement could go ahead only if Renewco were not classified as being in the public sector. By 1 October, that condition had not been met, so the payment could not be made.

However, the payment of the £162 million is a real diversion from the issues facing Railtrack. In discussions on restructuring, Railtrack made it clear that, even with the Renewco arrangement in place, Railtrack would still need additional Government support, and as my unchallenged petition to the High Court said, Railtrack would have a deficit of some £700 million by 8 December this year, and £1.7 billion by the end of March next year. Those were the figures. Railtrack's own view was that Renewco would not make a difference to those figures.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Is my right hon. Friend aware that, as the Select Committee minutes show, on 7 October Tom Winsor said:

"right up to the 5th October 2001"— which is the Friday before that Saturday—

"I did not know that the company was claiming to government that it was in serious financial difficulties . . . The company's representations to my office were all consistent with the company having enough money to keep going until . . . sometime in summer 2002".

In other words, Railtrack was misleading the regulator. That is why, as we have heard, Railtrack presented the new petition to the regulator.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

I think that when all hon. Members have the opportunity to go through the evidence and the regulator's statements, they will see that Railtrack did not avail itself of the possibility of an interim review although it was invited to do so by the regulator on the evening of Saturday 6 October. The petition that I presented to the High Court was unchallenged although Railtrack and its counsel appeared in court.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

No. I have been very generous in giving way, and I want to conclude my remarks because many other hon. Members wish to speak.

The serious allegations have been addressed.

Hon. Members:

Give way.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

The record will show that I have previously given way to the hon. Member for Maidenhead. [Interruption.]

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Order. The Secretary of State has stated that he is not giving way, and that includes to Front Benchers.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

Hon. Members know that I am generous in giving way. I have already given way in this debate three or four times to the hon. Member for Maidenhead. I should now like to address the issue at hand, and specifically to examine Railtrack's stewardship of the railway network.

My decision on 5 October to refuse further funding to Railtrack was not an easy one. However, I firmly believe that Railtrack was not part of the solution for our railways but a major problem. Let us consider Railtrack's stewardship. No asset condition register for the rail network is yet in place. Railtrack consistently opted not to invest in and maintain the network to a sufficiently high standard. Six months after Hatfield, more than 1,000 temporary speed restrictions were still in place. Costs on the crucial west coast main line project had leapt from about £2 billion to £6.3 billion under Railtrack's leadership, which is an increase of more than £4 billion.

We had to say, "Enough is enough. Let us get to the root cause. Let us look at the structure and put it right, so that for the extra money that the Government are committing to railways, we will get a real return for the travelling public."

The Transport, Local Government and the Regions Committee has made its concerns very clear. It said:

"We . . . agree with the Rail Regulator's assessment, that Railtrack has not maintained and renewed the network to a standard which could reasonably be expected of it. Its past record is simply not acceptable."

The Committee continued:

"The system of managing contractors who carry out maintenance and renewal work on the railway through the system of 'cascaded safety cases' has been shown to have utterly failed. It is not just the system that has failed: Railtrack's management of its contractors has been woeful."

The Rail Regulator—the man who is responsible for regulation and for maintaining the railway network's independence—made the following points when asked whether he would have provided extra funding for Railtrack.

Photo of Gregory Barker Gregory Barker Conservative, Bexhill and Battle

On a point of order, Mr. Speaker. Is it not unprecedented for a debate of this importance to be held without the attendance of a single Cabinet member bar the Secretary of State?

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Order. That is not a point of order.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

The advice that I gave to my Cabinet colleagues was not to be too exercised by a half-day Opposition debate. To be honest, most Cabinet members have far more important things to do than to listen to the rubbish that we have heard today from Opposition Members.

I was about to give the House the benefit of the Rail Regulator's view on Railtrack. Asked whether he would have provided extra funds for Railtrack, he said that he had no duty or inclination to give taxpayers' money to a company to make up for its being inefficient and incompetent. It was possible, he said, that the company thought that if he would not give it money for being inefficient and incompetent, maybe the Government would. He thought that that was

"an extraordinary judgement for the company to make".

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

No, I will not give way. The hon. Lady has had her opportunity: she has intervened four or five times, and she has not scored a hit so far.

Interestingly, one group did very well out of Railtrack. We have heard about the dividends paid over the years—£700 million—but the other group that did well was the directors of Railtrack. My hon. Friend Mr. Salter gave the figures: the directors were paid more than £10 million between 1996 and 2001, including £1.3 million paid to Gerald Corbett, Railtrack's chief executive. This is the man who told Members of Parliament in the year before the crash at Ladbroke Grove that the tracks outside Paddington were safe. Lord Cullen described those comments as complacent or misleading.

We have heard it all before, and we will hear it all again. This is the Tory privatisation culture that led the chief executive of Railtrack to tell Members of Parliament that the tracks outside Paddington were safe, which, according to Lord Cullen's investigation, was complacent or misleading. Two days after his report, which said that Gerald Corbett was complacent or misleading, Railtrack revealed the payment of £1.3 million. It is clear that the only things that Railtrack could get working on time were the executive compensation schemes.

This country has the fourth largest economy in the world, but we do not have a railway service to match it. Action was needed to put the interests of long-suffering rail passengers first. They know that Railtrack has been at the heart of the problems experienced by the industry—a company that failed to offer an adequate service, and then came asking for yet more taxpayers' money. The Tories, in this debate and previously, have backed the interests of a quarter of a million shareholders against the interests—[Interruption.]

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Order. Hon. Members should not shout.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

The debate will show clearly that the Tories are backing the interests of 250,000 shareholders against the interests of 2.5 million people who travel on the railway network every day. They cannot come to terms with the fact that a failed privatisation has been ended by the Government.

Delivering to passengers will now come before dividends for shareholders. Our people and our country deserve a railway system that is fit for the 21st century, and, no matter what the criticisms may be, we shall make the decisions that are necessary to enable that to happen.

Photo of John Smith John Smith Labour, Vale of Glamorgan

On a point of order, Mr. Speaker. Can you offer me some guidance? I think that, during my right hon. Friend's speech, an Opposition Member intervened claiming to be a shareholder in Railtrack. I may have misheard, but I understood that that was what was being said. Given the nature of the debate—part of whose purpose is, I understand, to shore up the share value with taxpayers' money—is it in order for shareholders to take part in it, or not to declare an interest?

Photo of Michael Martin Michael Martin Speaker of the House of Commons

It is up to individual hon. Members to declare an interest. Additionally, I remind hon. Members that we must have some calmness in the Chamber.

Photo of Don Foster Don Foster Liberal Democrat, Bath 4:45 pm, 13th November 2001

I begin by joining Mrs. May and the Secretary of State in expressing sympathy to all who were affected by the dreadful air crash in New York yesterday.

Given that so much desperately needs to be put right about our railways, it is regrettable that precious parliamentary time is being spent on a debate that is largely about who said what to whom, and when that was said. We have failed to address the key problems of our railways for far too long. It is a great pity that the Labour Government failed to act more quickly. It is also a great pity that, in this debate, we have not heard a single, solitary solution to the problems of the railways from any Conservative Member. Even worse, no Conservative Member recognises the nature of the real problems that faced Railtrack and that needed to be resolved. Despite the excellent work of many Railtrack employees, there were significant worries about the organisation, and reference has already been made to the matter of golden goodbyes. Although the Secretary of State referred to Gerald Corbett, he forgot to add that it was Gerald Corbett who apologised for Railtrack's failures.

There have been numerous worries about Railtrack's repeated failure to meet each of the new deadlines that it set itself in order to get back to so-called normal following the Hatfield tragedy. There have been worries about the management and supervision of sub-contractors, and about cost overruns. Many people who saw the work of Railtrack at close quarters have expressed considerable worry. Much of the debate about Tom Winsor's evidence to the Select Committee on Transport, Local Government and the Regions last week has been about whether he was threatened by the Secretary of State. Sadly, little attention has been focused on some of the Rail Regulator's other comments about precisely what he thought about Railtrack as an organisation. He said that he believed that they were the authors of their own misfortune, and that the core problem was the competence of the management of the company. He added that

"I have no duty—and indeed no inclination—to give . . . taxpayers' money to the company for being inefficient or incompetent."

Amazingly, the Rail Regulator went on to say that, for the life of him, he could not understand why a company that depended so much on its assets should have failed to produce a proper detailed asset register. He had to ask Railtrack on three separate occasions to produce voluntarily such an asset register and, when it failed to do that, he had to make its production obligatory. Tom Winsor was clearly worried, as were the train operating companies.

It is worth reflecting that over the past four weeks—from 13 October—there has been a significant decline in passenger numbers on our railways. Approximately 2 million people have abandoned the railway system. Phil White, the chief executive of National Express, which is one of the largest train operating companies, was asked the reason for that. He made it clear that he blamed Railtrack and, not least, passengers' increasing frustration with the number of speed restrictions that are still in place.

Of course something had to be done—not least because of the financial viability of Railtrack. In January, the company was placed on credit watch and then its credit ratings were dropped. On 18 February, Railtrack itself announced that it was significantly slashing its five-year investment programme. On 2 April, Railtrack went round with its now infamous begging bowl, asking for additional money.

Photo of Chris Grayling Chris Grayling Conservative, Epsom and Ewell

As the hon. Gentleman is giving the same speech that he gave in Westminster Hall this morning, perhaps I could make the same intervention that I made then. Does he agree that one of the reasons for the financial pressures on Railtrack was that the regulator had given the company what amounted to, in effect, a standstill budget for the next five years for repairs and maintenance of the network, despite the fact that the company was being asked to preside over a 50 per cent. increase in passenger numbers over the next few years?

Photo of Don Foster Don Foster Liberal Democrat, Bath

Let me shock the hon. Gentleman by giving him the same answer that I gave him in Westminster Hall: he will be well aware that, before that time, Railtrack had already decided to slash its investment budget. Furthermore, let me give him some additional information that I did not give him in Westminster Hall: it is clearly on the record in the Rail Regulator's evidence to the Select Committee that, on many occasions, he had made the offer to the company that it could come to him for a further review, but it failed to take up that offer. It is further evidence of real concern as to the competence of the management of the company that it failed to take up such offers.

It is also important to consider what happened as we came nearer and nearer to the Secretary of State's decision. On 24 May, Railtrack reported an annual loss of £534 million and the share price fell by a further 3.7 per cent. Throughout the life of the company, the general trend of its share price has been downward. By 6 June, the share value had fallen so low that the company was ejected from the FTSE 100. Interestingly, one of the main commentators, A.B.N. Amro noted:

"The full year results should leave investors in no doubt that their equity is in danger of being wiped out."

It is a great pity that Railtrack's management did not warn shareholders of that situation.

Amro also pointed out that Railtrack

"has been valued on hope rather than fundamentals for too long".

It was thus hardly surprising that, on 12 June, the Rail Regulator advised Railtrack to stop hawking its begging bowl around.

In August, as the Secretary of State has already told us, Railtrack's own advisers suggested that there were only three options: restructuring, renationalisation or receivership. As all those problems were mounting, it makes perfect sense to those of us on the Liberal Democrat Benches that the Secretary of State had to act. He had to do something in the interests of the public.

Although the Secretary of State must bear some responsibility for the way that he acted—as I shall explain in a moment—the shareholders, whose grievances have been so loudly expressed by Conservative Front Benchers, should be looking to the real author of their difficulty: not the Secretary of State, but mainly the management of Railtrack.

I fully realise that many of those shareholders are Railtrack employees, but I hope that they will reflect on the interesting fact that on 25 July the company was prepared to hand out to its employees shares worth £5 million, but two weeks later began to develop plans to slash one in 12 of the work force. That is the measure of its regard for its employees.

Photo of Michael Weir Michael Weir Scottish National Party, Angus

I am interested in the point that the hon. Gentleman makes about the company's shareholders. In a previous life—in the latter part of last year—I was approached by a stockbroker who was advising one of my clients to invest in Railtrack. I pointed out that the share price was poor at that point, but I was told: "Don't worry about that, because the assets are much greater. Even if anything goes wrong, you'll be all right". The fact that such advice was being given to shareholders may be one factor, but they should have been aware of the falling share price even at that time.

Photo of Don Foster Don Foster Liberal Democrat, Bath

Indeed they should, and attention was drawn to that point on 25 July. The hon. Gentleman hits on an important point. I hope that the House will remember that the hon. Member for Maidenhead suggested that the shares were now completely worthless. That is simply not true, for the very reason that the hon. Gentleman gives; there are still significant assets available to shareholders.

Photo of Stephen Byers Stephen Byers Secretary of State, Department for Transport, Local Government and the Regions

It is also important to make the point that there are effectively two companies. The first, Railtrack plc, is in administration. The other, Railtrack Group, is not in administration and the value in Railtrack Group is available to the shareholders of Railtrack.

Photo of Don Foster Don Foster Liberal Democrat, Bath

I am grateful to the Secretary of State for making that point, but we shall return in a minute to the issue of the two companies and the confusion that has existed because of that. The Secretary of State is absolutely right to remind us that significant assets are still available to shareholders and those are the subject of on-going deliberations. The shares are not worthless, as the hon. Member for Maidenhead said.

Our argument is that the Secretary of State was right to act. He was certainly right to decide that the solution was not one that involved pouring yet more taxpayers' money into this ailing and failing company. He was right also to seek to develop a solution that would end the conflict in a monopoly between shareholder profit and passenger safety. Something had to be done, and the Secretary of State's proposals to seek to develop a not-for-profit public interest company were definitely right.

It is not surprising that we say that because, as far back as 14 February, we proposed that model to the Secretary of State. The week after we made our proposal, the Institute for Public Policy Research made a similar proposal. I acknowledge that the solution was the right one, but I fear that the way in which this has been handled, in part by the Secretary of State, may mean that following a botched privatisation, we are in serious danger of botching the solution with which he has come forward.

Photo of John Pugh John Pugh Liberal Democrat, Southport

Does my hon. Friend agree that the Secretary of State could have exonerated himself from the charge of planning renationalisation by pointing out that nobody would willingly and with premeditation cause as much confusion in the railway industry as he has by his actions?

Photo of Don Foster Don Foster Liberal Democrat, Bath

I am grateful to my hon. Friend and I will come on to why I believe the Secretary of State, having got the right solution, has caused great confusion. Partly that was because the Secretary of State had to rush into making the decision. For a long time, the Labour party—particularly when in opposition—railed against the Conservative Government's privatisation of the railways. One had the impression that, once in Government, Labour would take some serious action to address the problems. But, in practice, they did very little in their first term of office.

There were times during their first term when one began to wonder whether they had changed their tune and were now great fans of privatisation. Within two years of coming into office in 1997, the Labour Government Foreign and Commonwealth Office—in collaboration, interestingly, with the Department of Trade and Industry—produced a booklet from the UK Railway Sector Group entitled, "Releasing the Power of Rail". That certainly did not criticise the Conservative party's privatisation of the railways. It is perhaps worth noting that the booklet was intended for overseas consumption, and not for consumption in this country.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Conservative, Cotswold

The Liberal Democrats are long on criticism but short on solutions. Since his party was so clever as to propose a not-for-profit company in February, will he now tell us how the Liberal Democrats would lever in £30 billion of private money under such a not-for-profit company?

Photo of Don Foster Don Foster Liberal Democrat, Bath

If the hon. Gentleman will be patient, I will come to that. I was critical of his party for failing to come up with any solutions, so it is clearly incumbent upon me to give some suggested solutions to the problem. I have every intention of doing so in a few minutes.

Photo of Don Foster Don Foster Liberal Democrat, Bath

No. I want to quote from the booklet, because it shows the problem that the Labour Government had in reaching a solution. The booklet, intended for overseas consumption, was hardly critical of privatisation when it said things such as:

"Railways are back . . . Trains are cleaner, safer and often a good deal faster . . . There is new energy and enthusiasm in the industry."

It even boasted, despite what it now says about fragmentation:

"There are now 25 operating companies, instead of just one" and concluded:

"The arrival of competition has produced a surge of talent and innovation."

Therefore the problem was that there was a schizophrenia in attitudes to privatisation in the first term of a Labour Government.

In the second term, after the general election, there still was not the glimmer of an intention, even by a new Secretary of State, to act. On February 14, when we produced the proposals that Mr. Clifton–Brown mentioned, my right hon. Friend Mr. Kennedy had raised the proposals at Prime Minister's questions, and received from the Prime Minister the bizarre answer:

"I do not know what the right hon. Gentleman means by a not-for-profit organisation".—[Hansard, 14 February 2001; Vol. 363, c. 308.]

Obviously, that solution was not even a glimmer in the Government's eye at the time.

Much later, in June, that solution was still not being planned—nothing was afoot—because the Department's press release No. 285, of 18 June, had an interesting heading: "Government Pledges Certainty to allow the Industry to tackle the tough job ahead on our railways" and the Secretary of State was quoted in it as saying:

"So I am not going to embark on big structural changes. What the industry needs now is a period of stability and certainty so it can concentrate on the vital job of delivering safe, reliable services for passengers and freight."

In July, as the situation continued to worsen, Liberal Democrat Members again made attempts to persuade the Secretary of State to push the not-for-profit model. On 3 July, at Department for Transport, Local Government and the Regions questions, I asked the Secretary of State:

"Will he reconsider his decision to make no major structural changes and examine proposals for bringing the parts of Railtrack that directly" relate to running

"the railways into a not-for-profit public interest company?"

The Secretary of State had an opportunity to reply, and he did. He said, interestingly, that the proposals would require legislation; we have heard nothing about any need for legislation now. He then said of the proposals:

"They would simply introduce paralysis into the system, when we want genuine improvements."—[Hansard, 3 July 2001; Vol. 371, c. 137.]

In July, therefore, there was no intention to follow our proposals and yet, despite all that confusion, by 5 October the Secretary of State—and, presumably, the Prime Minister—had done a huge U-turn and decided to do so. The problem was that everything had to be done in such a rush that, effectively, the Secretary of State had to adopt the nuclear option approach, instead of taking the time, as we proposed in our document, to have discussions with Railtrack about that option—something that Railtrack's advisers proposed could be discussed with the Government as early as the middle of August.

Photo of John Redwood John Redwood Conservative, Wokingham

Is it Liberal policy to give any compensation to either or both shareholders and bondholders? What is the Liberal party's estimate of the costs of strengthening the balance sheet, paying the current bills, sorting out the administration and giving the new not-for-profit company a strong enough foundation? Would it not be a very expensive matter?

Photo of Don Foster Don Foster Liberal Democrat, Bath

I shall answer the second part of the right hon. Gentleman's question in a minute. In answer to the first part of the question, we have made it absolutely clear that we do not believe that any additional Government—that is, taxpayers'—money should be put into supporting the shareholders. We recognise absolutely that a significant value remains in those shares as a result of the assets that still remain available to them, and that matter is being discussed at present. However, as many hon. Members have said, people holding shares should be aware that their value can go down as well as up. Anyone who had followed the value of Railtrack shares over a long period would have seen exactly where they were heading; the graph shows it clearly.

Photo of Don Foster Don Foster Liberal Democrat, Bath

No.

However, if the Secretary of State had to rush into his decision, there is also some confusion as to precisely what that decision is. On 15 October, having said that he was going to try to make changes, he said:

"We shall propose to the administrator that a private company limited by guarantee be established to take over Railtrack's responsibilities. Any operating surplus it makes will be reinvested in the railway network . . . As it would have no shareholders, we would remove the conflict between the need to increase shareholder value and the interests of rail passengers."—-[Hansard, 15 October 2001; Vol. 372, c. 955.]

It is clear from that that the proposal was one that the Secretary of State was putting to the administrator. However, on 5 November, in an answer to his hon. Friend Mrs. Dunwoody, he said:

"Now we can move forward and put in place a structure whereby, because it will be a not-for-profit organisation, any operating surpluses can be used for the interests of the railway network."—[Hansard, 5 November 2001; Vol. 374, c. 24.]

At that point, the Secretary of State is stating definitely what the structure will be. However, on 6 November, in his speech to the Confederation of British Industry, he said:

"But the company limited by guarantee is only one possible model."

There is considerable confusion, so I hope that the Minister who winds up the debate will provide a clear explanation. My understanding is that the administrator is entirely independent, and that it is for the independent administrator to decide whether or not to establish the model that both the Secretary of State and the Liberal Democrats want.

Photo of Chris Grayling Chris Grayling Conservative, Epsom and Ewell

Will the hon. Gentleman make clear his party's policy on the not-for-profit company? He has said that he would not countenance compensation from the public purse being given to shareholders, but if he rolls back the clock to the summer, when his policy was to pursue that option, did he expect that the company's assets would be confiscated through an administration order, as the Government have done?

Photo of Don Foster Don Foster Liberal Democrat, Bath

No. I am more than happy to share with the hon. Gentleman a copy of the document that has been publicly available since 14 November. It sets out three stages, the first and most sensible of which would have been to hold discussions with Railtrack. Given that that sector of its overall activities was making a huge loss, it is not unreasonable to suppose—as the company's advisers hinted during the August discussions with the Government—that the company might have wanted to pursue that option with the Government's support. The hon. Gentleman can read about the other stages.

There is one other area in which the Secretary of State is guilty of causing some confusion. Just a few minutes ago, he intervened to remind the House that there are two separate organisations: Railtrack Group and Railtrack plc. He is absolutely right to say that the distinction between the two is crucial to understanding what happened.

When I raised that specific issue during the discussion following the private notice question on 5 November, the Secretary of State replied:

"Some of the confusion has been caused by the fact that there are two companies: Railtrack plc, which holds the licence to operate the network and which is in administration; and Railtrack Group, which is not in administration and is still run by the directors of Railtrack."—-[Hansard, 5 November 2001; Vol. 374, c. 24.]

That is clear. The implication is that it is everyone else, not the Secretary of State, who is confused about the distinction between the two bodies. Yet in his statement to the House on 15 October, he made specific reference to Railtrack on no fewer than 30 separate occasions, on 29 of which he referred only to "Railtrack" and made no distinction between Railtrack plc and Railtrack Group. On only one occasion did he refer to Railtrack plc. Perhaps most significant of all is that part of the statement in which the right hon. Gentleman spoke about what was being put into administration. He said, not Railtrack plc, but

"Railtrack was taken into administration because it was, or was likely to become, unable to pay its debts."—-[Hansard, 15 October 2001; Vol. 372, c. 955.]

I do not accept that it is worth spending much time debating issues of who said what to whom and when. I genuinely believe, however, that the way in which the Secretary of State has handled the issue has led to some of the confusion. My biggest fear is that, because of the confusion, the new vehicle that the right hon. Gentleman hopes will be agreed by the administrator—the not- for-profit public interest company—may have real difficulty in attracting private investment. That is the key concern.

The hon. Member for Cotswold asked me what the Liberal Democrats would do about this. We have always made it clear that we believe that a not-for-profit public interest company should be able to raise bonds, but those should be Government backed. The Government are creating huge problems for themselves because of their obsession with the public sector borrowing requirement. The only successful way to move forward is by the approach I have outlined.

Photo of Theresa May Theresa May Shadow Secretary of State for Transport, Local Government and the Regions

I am grateful to the hon. Gentleman for giving way and for responding to my hon. Friend Mr. Clifton-Brown. The hon. Gentleman has just said that the bonds would be Government backed. Presumably, that means a Government guarantee. How big a guarantee would he expect them to give? Would it be for the full £34 billion?

Photo of Don Foster Don Foster Liberal Democrat, Bath

The hon. Lady must consider the sums of money that would be required. As she is well aware, there are normally three ways to borrow money. The first is for the Government to borrow directly, which is the cheapest way and that is why a number of people want the complete renationalisation of Railtrack. The most expensive way is to borrow on the open market. The middle way—if one dare use that phrase—is to do it with Government guarantees. That would seem to be the most likely way to ensure that the money is produced.

Photo of Don Foster Don Foster Liberal Democrat, Bath

The hon. Gentleman referred to the 1 per cent. and 2 per cent. returns that would be required in an earlier debate, so I will not go into that now.

Photo of Don Foster Don Foster Liberal Democrat, Bath

No. I want to finish now as many other hon. Members want to speak.

I end where I began. A great deal needs to be done to put right the problems on our railways. We should be debating not who said what to whom and when, but how we are to move forward with this new model for Railtrack: how to reduce fragmentation in our railways and find ways to put the track and trains together; how to get rid of the perverse penalty system; how to tackle the real problem of ridiculously high fares, which are some of the highest in the world; how to make more of our stations safer; and how to integrate trains and other forms of travel. Those are the questions in which the travelling public are interested. They want a safe, reliable and affordable railway and they want it quickly. Today's debate has not moved that on one iota.

Several hon. Members:

rose

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. Before I call the next speaker I remind the House that a 12-minute limit on Back-Bench speeches applies from now on. I call Mr. Hall.

Photo of Mike Hall Mike Hall Labour, Weaver Vale 5:13 pm, 13th November 2001

First, I offer my condolences to the families of those killed in the air crash in New York yesterday. It is right and proper for hon. Members to realise the gravity of that accident and to offer our condolences.

I thank you, Mr. Deputy Speaker, for calling me to speak in a debate that has, ostensibly, been called by the Opposition to scrutinise the role of my right hon. Friend the Secretary of State for Transport, Local Government and the Regions in placing the administration order on Railtrack.

We could look at the debate in a completely different light and see that it is a smokescreen intended by the Opposition to block out why we are debating the issue in the first place. It was the Conservative Government's privatisation of Railtrack that has left us where we are this afternoon.

The start of the debate was interesting. Mrs. May had the opportunity to explain Conservative party policy towards public transport in general and the railways in particular. She failed to do so and instead launched a personal attack on my right hon. Friend the Secretary of State. That attack was unwarranted. She did not make the case and, at the end of the debate, we will see clear support for his actions in the Lobby, which is right and proper.

Clearly, the Tory party does not want to debate the failure of Railtrack because it was the architect of that failure. In 1993, the Conservatives were responsible for the legislation that paved the way for Railtrack and they proceeded with the flotation of the company on 20 May 1996.

I am conscious of the fact that I have not spoken in the House for a while, but I have listened to an awful lot of debates. The Tories' contribution to this afternoon's debate qualifies them as a top candidate for the brass neck of the year award. The way in which they have broached the issue is breathtaking.

Photo of Eric Pickles Eric Pickles Shadow Minister (Transport)

The hon. Gentleman is reading from a prepared speech.

Photo of Mike Hall Mike Hall Labour, Weaver Vale

Of course I am. It is a long time since I have spoken in the House, and I am being careful about my remarks. Earlier today, I noticed that the hon. Gentleman was reading out his speech from the Dispatch Box in Westminster Hall.

Photo of Mike Hall Mike Hall Labour, Weaver Vale

But the hon. Gentleman read out his speech.

This is an interesting debate. Railtrack came to my right hon. Friend the Secretary of State and asked for a blank cheque to oversee the running of the company not just for this year, but for many years to come. It is interesting that a public company should come to the Government and say, "Please will you give us a blank cheque to cover our operations." It is not the Government's role to underwrite companies on the stock exchange, nor is it their role to give further subsidy to a company that has had so much Government money in the past five years that it should not have had to go to the High Court.

Photo of Mike Hall Mike Hall Labour, Weaver Vale

Not at the minute. If the hon. Gentleman will allow me, I will develop my argument. If I do not cover the point that he wishes to make, I am prepared to give way to him later.

When the previous Government floated Railtrack on the stock exchange in 1996, it should have had a secure future. It had a valuable property portfolio and an annual guaranteed income stream of Government subsidy worth £1.8 billion. Why did it need to come to the Government after five years, during which it must have received £8 billion, to ask them to prevent it from being put in a position in which it might be trading insolvently and in which it was certainly unable to cover its costs.

Photo of Mike Hall Mike Hall Labour, Weaver Vale

Not just yet; the hon. Gentleman must be patient. If he catches your eye, Mr. Deputy Speaker, he may get the chance to speak. There is a time limit on this debate, and I am conscious that many Members want to participate in it.

Railtrack ultimately failed because privatisation by John Major's Administration was a rushed, botched and incompetent exercise that failed to deliver value for money for taxpayers. Specifically, it gave shareholders confidence in an unsound company and left the travelling public saddled with an inefficient and unsafe railway network.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Conservative, Cotswold

The Government have had four years to sort it out.

Photo of Mike Hall Mike Hall Labour, Weaver Vale

Things take time. If the privatisation had not been botched in the first place, we would not have needed to use so much public money to sustain that public limited company. Today, we have not had any apologies from the Opposition for the way in which they privatised Railtrack.

Photo of Mike Hall Mike Hall Labour, Weaver Vale

Not at the moment.

We should receive at least some apology from the Opposition for the way in which they dealt with privatisation and for putting the travelling public in a difficult position. Right from the start, the Tories' motivation for privatising Railtrack was not difficult to discern. It was not to maximise receipts for the Treasury or make sure that the travelling public had a safer or more efficient railway—as my right hon. Friend the Secretary of State said, they were motivated by pure party political dogma.

I do not expect the House to take my word for that. I urge Members to read the twenty-fourth report of the Public Accounts Committee, from the 1998–99 session. The House will recall that Railtrack was floated on 20 May 1996, as I said, and shares were issued at £3.90. The offer was oversubscribed by 10 per cent. and the Government raised £1.9 billion from the sale. Like many preceding privatisations, the sale of Railtrack was characterised by the fact that the company was undervalued, shares were underpriced and taxpayers were ripped off. It is no wonder that the PAC said that Railtrack

"had been undervalued and sold in haste".

It is clear, even to the most partial observer in the Chamber, that the sale of Railtrack was not motivated by a desire to drive up standards in the railways, and certainly not by a desire to maximise profits for the Government—it was motivated by pure party political dogma.

On 15 February 1999, in evidence to the Public Accounts Committee, Sir Richard Mottram, the permanent secretary at the Department of the Environment, Transport and the Regions, told the Committee that

"in the political circumstances of that period, a 100 per cent. sale was required".

The circumstances to which Sir Richard referred, as confirmed in the twenty-fourth report of the Public Accounts Committee, were that the Tory Government had decided to sell 100 per cent. of the shares in Railtrack because of the prospect of a Labour victory in the pending general election.

I have no doubt that I am right. Sir Richard Mottram is a highly regarded, top-ranking civil servant. His evidence to the PAC was given impartially and provides irrefutable proof that Railtrack was privatised for political purposes. The report also confirms that the aim of privatising Railtrack was to give shareholders the best possible deal. The House will realise that the Tories failed to achieve that.

At the time that Railtrack was privatised, it was described as having a secure and profitable income stream; a large asset base, including a substantial property portfolio; scope to reduce costs; and considerable investment potential. The Tory Government went even further and guaranteed the company an annual income of £1.8 billion, wiped off £1.4 billion of debts and offered the shareholders, in their first year, a return of 19 per cent. on their investment. Over the past five years, Railtrack has enjoyed about £8 billion of hard-earned taxpayers' cash, but in the same period the travelling public have suffered enduring delays in services, increased travel costs and misery at the hands of a privatised company.

Anyone who has had the misfortune to travel on the west coast main line will confirm that the two major problems facing the line are that the track is totally inadequate and the signalling is in urgent need of modification and major investment. The west coast main line connects the north-west and Scotland to London. It is in a deplorable state. I cannot tell the House how much the economy of the north-west has lost as a result of the state of the line, but one thing is certain: because of the way in which Railtrack has handled its affairs, the prospect of the west coast main line being improved and upgraded under its stewardship has been no more than a pipe dream. The cost of that project has risen to more than £6 billion.

Photo of Mike Hall Mike Hall Labour, Weaver Vale

I give way to the hon. Gentleman, whom I have come across before.

Photo of Chris Grayling Chris Grayling Conservative, Epsom and Ewell

The hon. Gentleman is presenting a black picture of Railtrack and its capabilities. If that is the case, why did his Government choose to make Railtrack the principal investment vehicle for their 10-year plan for rail?

Photo of Mike Hall Mike Hall Labour, Weaver Vale

That is an important question. Railtrack was the company that owned the track at the time that the 10-year rail plan was introduced. It was not until the early part of this year that Railtrack told the Government that it was facing severe financial difficulties. That is the straightforward answer. It would have been stupid not to include in the 10-year plan the company that owned the track.

I beat the Conservative candidate in Warrington, South by only 191 votes in 1992. The hon. Gentleman fought the seat in 1997 and lost to my hon. Friend Helen Southworth[Interruption.] I had not gone on the chicken run by then.

How could a company like Railtrack find itself in such financial difficulty? With all that public money, why could it not invest in the rail and provide a brighter future for people who travel on the railways? There are two possible answers: at the time of privatisation, either the then Government did not know the state of disrepair of the track, or they knew the state of disrepair but did not tell anybody. The investment problems that Railtrack has experienced since the Hatfield disaster have brought it to its present state. If the then Government sold Railtrack without knowing the state of the track, that is one thing, but if they knew about the state of the track and did not tell anybody, that is criminally deceptive. That question needs answering.

The next question that needs answering is why, once Railtrack was a publicly owned company, it did not carry out an investigation into the state of the track to find out what liabilities it had taken on? It might then have been able to plan a way forward to prevent the position in which it now finds itself. It might have been able to put a plan into action to build, over time, a railway that was efficient and effective for people to travel on.

I am not sure what the answer is, but one thing I know for sure is that Railtrack did not tell its shareholders about the state of the company when it went to see the Secretary of State to ask for more money. I am certain that it knew that it would find itself unable to meet its debts, and therefore went to the Secretary of State. He has made the right decision, which is why the Tory party is on the wrong side of the argument this afternoon. We must take forward Railtrack in administration, find a secure future for it and ensure that the travelling public are better looked after.

Photo of Kenneth Clarke Kenneth Clarke Conservative, Rushcliffe 5:25 pm, 13th November 2001

The Secretary of State was typically calm in the face of this afternoon's attack and the Back Benchers who came in to support him were extremely boisterous in that support. I am afraid that that merely arouses further my alarm about the future of the railways. I do not think that Labour Members appreciate just how much damage has been done. The blunders and behaviour of the Secretary of State will have lasting consequences which will be felt in more than one area.

One important area, which we have debated this afternoon, is the damage done to shareholders' interests. It is plain that the Secretary of State remains unrepentant. I am sure that it will be further explored not only in this debate but by the Financial Services Authority and, in due course, by the courts. The way in which the Secretary of State has behaved would bring considerable retribution on anyone in the private sector involved in the affairs of a publicly quoted company who behaved in such a way towards the markets and the company's owner.

The damage that is obviously not appreciated by the Secretary of State or by Labour Back Benchers is that done to the future prospects of the railways. We should remind ourselves that there is probably widespread agreement in the House that the dominant issue to be addressed is how we are to raise the vast amounts of investment required to modernise the railway system and provide the travelling public with what they require. There is a need for £35 billion of private investment, on top of which it is likely that a lot of public investment will be required. No one listening to this debate could appreciate that that statement is supposed to be agreed to by the Labour party with the same enthusiasm with which the Conservatives and Liberal Democrats endorse it.

In order to raise huge amounts of private investment, it is extremely important that the markets respond to the appeal and that the investment should be delivered in good time—parts of the railway network are probably deteriorating as we speak. It should also be delivered at reasonable cost to the taxpayer and the travelling public who have, in part, to service the return on that investment, and it must be invested efficiently to provide high quality service delivery to the public.

The Government have gone backwards on all those counts. The way in which they have treated Railtrack and handled the events of the past few weeks has gravely damaged the potential to raise that sum of money at all, let alone in time.

Photo of John Pugh John Pugh Liberal Democrat, Southport

Will the right hon. and learned Gentleman give way?

Photo of Kenneth Clarke Kenneth Clarke Conservative, Rushcliffe

No, because I am speaking to a strict time limit, otherwise I would do so with pleasure. I will touch on what Mr. Foster said in a few moments.

The Secretary of State's behaviour—his whole demeanour as well as his argument—shows me that he has learned nothing whatever either from his short time in office in this particular post or from the fact that the Government have, in more than four years, made remarkably little progress towards their ambition of getting the required private investment into the railways.

As the hon. Member for Bath said, the Secretary of State rushed into the decision. Looking at and listening to the Secretary of State, and it is the second time recently on this subject that I have done so, I think that he is enjoying it. I think that he thought that this would be a popular decision, which would play well with Labour Back Benchers. It is playing well with some of them, and I will come to that in a second—they will come to regret it.

Railtrack had been so vilified by members of the Government and their supporters that the right hon. Gentleman thought that insolvency would be greeted as a kind of public service, because fat cats who had caused accidents were being dispatched. I suspect that he even rushed out his announcement to ensure that it was not stolen from him by someone such as the Chancellor of the Exchequer, trying to take the credit for an announcement that was very popular with old Labour or those who still have some vestige of old Labour instincts.

The fact is that that instinct of the Secretary of State and of some of the hon. Members who have spoken is contrary to the Government's declared policy position. Since the moment when they came into office, the Government have never espoused the cause of renationalising the railways, because they know perfectly well that they have not the slightest prospect of raising the sums involved or of getting the quality of management that would be required if they ever reverted to a nationalised railway. Their policy is to make investment in the railways so attractive that it will continue to bring in the funds that are required.

I am genuinely indebted to the hon. Member for Bath, as I was not previously aware of the pamphlet that the Government published in their first term extolling the virtues of privatisation as it had progressed thus far, two years into office. The pamphlet needs to be commended to people such as Mr. Hall, who is responding in the way in which the Secretary of State wants his Back Benchers to respond. He made a speech that he could have made before 1997 or when he was fighting the election that year. He still thinks that the whole point is to vilify the privatisation process and to suggest that making profits out of private investment in railways causes accidents and reduces the level of service to the public. However, that is completely contrary to the direction in which the Government wish to go.

As my hon. Friend Mrs. May pointed out, that argument is also completely contrary to the evidence and facts for the first two or three years. The Government's pamphlet was well supported by the evidence. Following privatisation, usage of the railway soared. Indeed, that turned out to be one of the problems, given the old-fashioned infrastructure. I think that passenger usage increased by about 35 per cent., although I am speaking from memory, for which I apologise. Freight usage increased by about 45 per cent., trains became more punctual and the safety record improved. Hence, the virtues of the approach were extolled to people overseas.

The Labour party never quite learned from that and still has not done so. It was hostile to privatisation and it hankers to go back to more public sector control. I think that the Prime Minister and the Chancellor of the Exchequer have adopted the principles of privatisation and the private finance initiative, but, alas, their party has never done so. Indeed, even some of their Ministers have never really adopted those principles and do not approve of them.

That is why the Secretary of State should be careful before he gets too happy about his fate this evening. He may have every confidence in the Government Whips or think that there are only small numbers in the Conservative party, and he may get favourable write-ups in sections of the press—however, no Cabinet Ministers are here. Understandably, there is no sign of the Prime Minister or the Chancellor of the Exchequer. If I were the Secretary of State, I would look out for them as soon as the first reshuffle occurs. I do not think they are pleased with his work, as something must be done to deliver improvement on the railways. That is meant to be the second-term duty of the Government, who say they want to deliver noticeable improvements in the quantity of public service, but, as hon. Members may gather, they have gone in the opposite direction and are gravely damaging the prospects of raising the private sector investment that they want.

The Deputy Prime Minister followed exactly the same pattern when he was responsible for these matters in the previous Parliament. He was hostile to the people with whom he should have been working from the moment when he took over responsibility for the railways. He enjoyed any discomfiture on the part of the companies or those who were responsible for them. He was inclined to intervene too much and to encourage over-regulation, which was one of the factors that inhibited the progress of the privatised railway companies. Of course, he found the same problem—he was attacking the companies that were supposed to be raising the capital that was necessary to deliver the Government's policy.

The actual disaster that hit the finances of all the privatised companies was the aftermath of the railway accidents. The Government ordered inquiries, whose results I accept. They discovered management errors of the sort that occur in all organisations. However, the Government were content to allow the conclusion to be drawn that privatisation was somehow causing the accidents. The politicisation of railway accidents quite obviously meant that the reaction to the Hatfield crash was wholly excessive. The whole network was closed down for months and the finances of Railtrack and the operating companies have never been able to recover from that blow. Yet sections of the Labour party rejoiced, because they thought that the reputation of privatisation was being damaged again by those consequences.

The present Secretary of State, in his short time in office, has sought to make matters worse. The operating companies have been offered shorter franchises, which make it less likely that they will be able to raise the capital for more modern rolling stock. He has got rid of the people who should be helping him. He sacked—in effect—Sir Alastair Morton, with whom I worked on developing the private finance initiative—now the Government's policy—in the first place. Sir Alastair Morton is a very difficult man to work with; that is why I used to have him there. He has fear of no one—he gives Ministers his own opinion, and he gives their officials his own opinion.

That was all wrong for new Labour, and the best public servant it had was sacked. He was replaced by other public servants who were also difficult. Tom Winsor, the Rail Regulator, is now at odds with the Government over his account of what happened. That is a matter of pure semantics, as my hon. Friend the Member for Maidstone said. [Hon. Members: "Maidenhead."] Yes; they are a little different. The idea is absurd that the independence of the regulator is intact, when a Secretary of State with a huge majority says that if the regulator seeks to intervene further, legislation will be passed to curb his powers. That was an absurd intervention on the powers of the regulator by the Secretary of State, designed to deliver his chosen objective—the closure of Railtrack.

The Secretary of State has fallen out with all those people. He must have had a say in the choice of the directors of Railtrack, with whom he is now at war. That goes on. Now he wants to put a not-for-profit company, which he is unable to explain, in a position in which the same shareholders will come back to put up the money again and put themselves at the mercy of his behaviour again.

I conclude with the point with which I began. I do not think that it has crossed the Secretary of State's mind to consider the damage that he has done to the future of the railways and to the service that is likely to be given to the travelling public.

Photo of Louise Ellman Louise Ellman Labour/Co-operative, Liverpool, Riverside 5:37 pm, 13th November 2001

It is wholly appropriate that the Conservatives have brought the issue of Railtrack to the Chamber today. A better use of their time and ours, however, would have been to debate the possibility of a public apology by the Conservatives for their botched privatisation of our rail system, and to debate constructive proposals on how we might restore a rail service that meets the needs of the travelling public whom Mr. Clarke mentioned. We certainly do not have such a service at the moment.

Railtrack was, from the beginning, part of a botched privatisation. Some of my hon. Friends have already referred to the conclusions of the National Audit Office's report, and to the £6 billion shortfall in valuation between what was obtained and what was due to the public. Railtrack was part of a flawed system of privatisation that separated wheels from rail and fragmented the public transport rail system. Worse, Railtrack soaked up public subsidy as the beneficiary of at least £9 billion of taxpayers' money. It paid out £10 million to directors and £700 million to shareholders.

Photo of Louise Ellman Louise Ellman Labour/Co-operative, Liverpool, Riverside

I am sorry, but there are time constraints in this debate. I might give way later.

In the uncontested petition made to the High Court by the Secretary of State, it was shown that the company had a projected deficit of £700 million by December, rising to an anticipated £1.7 billion by the end of March next year. Are the Conservatives seriously saying that the Government should have been prepared to give more to a company in such a financial state? It was eating up taxpayers' money and failing to deliver. It wanted unidentified amounts of money—open-ended cash supplies—and had predicted deficits that were not challenged in the petition to the High Court. To have done so would have been a dereliction of public duty.

We should consider what Railtrack has failed to achieve. I will make particular reference to the west coast main line, because as hon. Members have said, that is an important issue, especially to the north-west region. The Transport Sub-Committee discussions made a number of things clear. They showed that, before Railtrack was placed in administration, discussions took place between Railtrack and Virgin, and that compensation to Virgin was considered because of Railtrack's failure to modernise the west coast main line as promised.

During the Sub-Committee discussions, £300 million in compensation which Virgin thought was due to it from Railtrack was mentioned. Indeed, I have heard reference to larger sums. In addition, reference was made there and elsewhere to the fact that Virgin sought rail ticket price increases as part of the compensation package. Virgin considered that it had lost money because of the failure to modernise the west coast main line.

It is surely absurd and unjust that travellers on the west coast main line are losing out because Railtrack, before going into administration, failed to deliver modernisation as promised. Individuals are losing out; the economy is losing out. The economy of the north-west, and that of other regions, has suffered a great deal because of that failure; but according to statements made by the chief executives of Railtrack and Virgin in the Sub-Committee, we have confirmation that the public purse was asked to compensate the privatised company for failure to deliver what the public were promised. That adds insult to injury.

Photo of Louise Ellman Louise Ellman Labour/Co-operative, Liverpool, Riverside

I may give way later.

The travelling public have already lost out because modernisation did not take place as promised, and now they are being asked provide compensation. That is particularly galling for travellers from Liverpool.

Owing to the privatised system and price rises inflicted by Virgin, some Liverpool-to-London services have increased in price by more than 100 per cent., and it is now impossible for anyone on such a service to get to London for less than £153 standard or £240 first class if they want to arrive before the afternoon. Liverpool is regenerating itself, but how can that be achieved if passengers face price increases of that order? They now hear that Virgin may increase saver ticket and other fares by 33 per cent. as part of the compensation package, because Railtrack failed to deliver.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Conservative, Cotswold

Will the hon. Lady explain how she can have confidence in her own Secretary of State levering in £34 billion of private finance, which will be needed if her constituents are to experience improvements in the London-to-Liverpool service and modernisation of the west coast main line?

Photo of Louise Ellman Louise Ellman Labour/Co-operative, Liverpool, Riverside

My comments show how Railtrack, despite receiving large public subsidies, woefully failed to modernise the west coast main line. Instead of trying to cover up their bad record on rail privatisation, will the Conservatives suggest some positive ways forward? If they did so, I suggest that support from the private sector for investment would be forthcoming. However, Conservative Members are more concerned to cover up their misdeeds, mismanagement and incompetence than to look after the needs of the travelling public.

Condemnation of Railtrack's management is easy to find. The evidence was clear in discussions that took place in the Select Committee over the past two weeks. Before that, the Select Committee's all-party report of March 2001 criticised Railtrack's performance in maintaining, renewing and developing the network, and described it as seriously inadequate. That criticism was supported by Conservatives on the Committee.

Only last week, Tom Winsor, the Rail Regulator, told the Select Committee:

"I believe that the company spent too long complaining about multiple stakeholder pressures and interfaces and failed to understand the simple realities of its business which are this: you do not neglect your assets and you are not hostile to your customers."

I cannot think of a more damning indictment. Comments of that nature were also made, by implication, to the Select Committee by the Strategic Rail Authority, the Department and by others giving evidence, including by the chief executive of GNER. Again and again, we heard about a company that apparently had no interest in its customers. Indeed, according to the regulator, it was hostile to them.

Our interest, however, must be in deeds rather than words. For the west coast main line, Railtrack simply failed to deliver. One privatised company is now seeking compensation from the Government, and fares have been put up for already hard-pressed travellers because the privatised Railtrack failed to deliver. I cannot think of a more damning indictment of a privatised industry.

Photo of Louise Ellman Louise Ellman Labour/Co-operative, Liverpool, Riverside

I am sorry, but I have only two minutes left.

We must now look to the future and consider what to do. I applaud the decision taken by the Secretary of State. It is appropriate that questions be asked about procedures and legalities, and questioning on those issues will continue at tomorrow's meeting of the Select Committee. However, it would be more appropriate if Conservative Members faced up to their failings of the past and, instead of continuing their dogged adherence to failed privatisation, accepted that rail privatisation was wrong. It was not in the interests of the taxpayer or of the travelling public, and I ask them to join Labour Members in seeking a constructive way forward, in which we have once again a rail service run in the interests of the travelling public.

Photo of Dr Brian Mawhinney Dr Brian Mawhinney Conservative, North West Cambridgeshire 5:48 pm, 13th November 2001

The essence of this debate on the handling of the Secretary of State's decisions relating to Railtrack is best summed up by the fact that he could not even stay to listen to what was said about his behaviour, and has already fled the Chamber. I wanted to start by finding some common ground with him, although I admit that I shall go on to be critical thereafter.

I share the Secretary of State's unhappiness about the quality of Railtrack management over the past few years. Had the Conservatives been in government, we would have taken a similarly jaundiced view of some of the decisions and behaviour of the Railtrack board. Mr. Corbett has a lot to answer for.

The giveaway in the Secretary of State's speech was how frequently he had to resort to the partisan and ideological instincts of his Back Benchers. We have seen that in the House for generations; it is not a new instinct, but it is always a reflection of a Minister who is in trouble. That is what we heard today.

The Secretary of State was all injured innocence. He could not understand what the fuss was about, but the truth is that he has form. Some time ago, he told the nation about a conversation that he had with the chairman of BMW, and the chairman of BMW said, "It ain't so." He tells the nation about a conversation with the chairman of Railtrack and the chairman of Railtrack says, "It ain't so." He tells the nation of a conversation with the Rail Regulator and the Rail Regulator says, "It ain't so." It reminds me of that old saying, "Everybody's out of step except our Johnny"—everyone knows the meaning of that.

I dealt with the Rail Regulator. We had a series of meetings during my 11 months as Secretary of State for Transport. We recognised our individual responsibilities. We showed respect for each other's responsibilities. Neither I nor any of my Secretary of State colleagues ever threatened to take away the independence of the regulator if he did not do what we wanted him to do, or thought should be done.

We have now got to the point where, following the Rail Regulator's evidence—I am not getting into semantics, either—the chief executive of Railtrack has, I am told, talked on the record about the possibility of legal action against the Secretary of State for "malfeasance in public policy". The House should not underestimate the seriousness of that charge. Whether he is proven in a court to be guilty or not, the damage is done to Railtrack and indeed to the Secretary of State by the very raising of that charge. My right hon. and learned Friend Mr. Clarke was right, as he so frequently is. The Government do not understand that the Rail Regulator is one of the guarantors of the confidence of the City and the private sector in putting money into organisations such as that. The damage will be enormous.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

Will the right hon. Gentleman give way?

Photo of Dr Brian Mawhinney Dr Brian Mawhinney Conservative, North West Cambridgeshire

No. There is only a limited amount of time.

Talking of the City, I remind the House of another comment that the Secretary of State has made in the Chamber on two or three occasions recently. It was one of the few things that my hon. Friend Mrs. May did not mention. He has repeatedly told the House that he has had discussions with people in the City and that they were all enthusiastic about putting more money into private finance initiative and public-private partnership projects.

Those of us who have had some experience found that a bit incredible, but there was no evidence to contradict the Secretary of State until I opened yesterday's Evening Standard and read:

"The Institutional Shareholders' Committee, which represents every investing body in the City . . . suggested there was a clear legal case for pursuing the Government over its handling of Railtrack.

The ISC also called on Bank of England Governor Sir Edward George to intervene in the situation to prevent lasting damage in relations between the City and the Government.

The committee states that it has written to Sir Edward 'to explain its concern over the need for a stable and productive relation between the Government and the City'".

Listen to this:

"It says the letter 'urges the Governor to use his good offices to promote a solution that alleviates this concern and will allow the City to continue financing projects of vital importance to this country'".

The City is telling the Governor of the Bank of England that, unless he finds a solution to the dispute between the Government and the City, the City will not invest in Government projects. That is not what the Secretary of State has told the House repeatedly.

Photo of Dr Brian Mawhinney Dr Brian Mawhinney Conservative, North West Cambridgeshire

I will not. The right hon. Gentleman will have time to respond at the end of the debate.

Yet again, the Secretary of State is saying one thing in here which is being disputed outside. Johnny still seems to be out of step.

I turn to the question that the Secretary of State did not answer. He was asked repeatedly whether he consulted the Treasury before the decision of 5 October. Indeed, he patronised my hon. Friend Michael Fabricant by telling him that he did not understand what he was asking because he had never been in government. Well, I have. I believe the Secretary of State when he says that he signed the documents on 5 October. I do not believe the Secretary of State when he says that the decision was made on 5 October. I shall tell the House what the Minister for Transport knows to be true, although he will not say it at the Dispatch Box. Because transport is one of the big spending programmes, the relationship between transport, the Treasury and No. 10 is extremely close.

My private office talked to the private office of the Chancellor of the Exchequer and the private office of the Prime Minister regularly. My senior officials talked to senior officials in the Treasury and in No. 10 regularly. The idea that I as Secretary of State would have made such a decision without its having been talked about and cleared by the Chancellor and the Prime Minister is bunkum—plain, ordinary, common or garden, copper- bottomed bunkum. That is why the Secretary of State would not answer the question this afternoon, though it was put to him repeatedly. The truth is that he signed the paper on 5 October, but the decision was made primarily by the Chancellor and the Prime Minister some time in advance. They said to the Secretary of State, "Go out and handle it."

My right hon. and learned Friend the Member for Rushcliffe was not always the easiest Chancellor for a Secretary of State for Transport to relate to, but my guess is that he was a jolly sight easier to relate to than the present Chancellor. If he would not have allowed me to make that decision, I do not think that the present Chancellor and the present Prime Minister would have allowed the Secretary of State to float off freely and on his own behalf, without reference to anyone, to make a decision and to announce it to the world. If the House thinks that that is what happened, it is more gullible than I know it to be. All that sums up the indictment of this debate, from which the Secretary of State has fled.

I accept that the Secretary of State is unlikely to take advice from me, but I would like to offer him three pieces of advice in a spirit of co-operation. First, he should get back to the positive and constructive things that he said about the railways when he first took office, before he understood the massive damage that his predecessor the Deputy Prime Minister had done to the rail network. He started well. Indeed, if he is not too embarrassed to admit it, he will even tell the House that one or two of us told him privately that we were encouraged by the start that he had made. He should get back to that frame of mind.

Secondly, the Secretary of State should work extremely hard to extricate the railways from the political football stadium in which he has placed them, which was demonstrated yet again by his speech today. Some of us who are keen to see an effective railway system might be more willing to respond positively to trying to help establish the railway system if it were done in a much less partisan and politically driven way.

Thirdly, the Secretary of State is in the Cabinet. He is a grown-up in political terms. As a grown-up in political terms, he should understand that what counts is not the volume of applause behind him or the vitriol of those in front of him. He will be measured by his effect on the railways. He has damaged them almost beyond repair. It is now time that he tried to redeem some of that damage.

Photo of Richard Burden Richard Burden Labour, Birmingham, Northfield 5:59 pm, 13th November 2001

As one who experiences the joys of the west coast main line most weeks, the issue of how to get our railway system up to scratch is of some importance to me. As one who represents a midlands constituency, I know that the future of our railway system is a far more important matter than whether my train gets to London on time. Establishing a rational structure in our rail industry is critical to the economic health of the region that I represent. As my hon. Friends the Members for Weaver Vale (Mr. Hall) and for Liverpool, Riverside (Mrs. Ellman) said, a rational structure is also vital to the north-west.

The issues and decisions that my right hon. Friend the Secretary of State has faced in the past few months are enormously important, and I believe that the public expect them to be treated as such by politicians of all colours. The public expect us to get our priorities right. Although I did not agree with many of the comments of Mr. Clarke, I think that he was at least attempting, certainly in parts of his speech, to address some of the real issues facing the rail industry.

If the public saw how Opposition Front Benchers have approached this debate, I would be surprised if they thought that the Opposition were getting their priorities right. The public know that, when Conservative Members privatised the railways, the theory was that the rigours of the market mechanism, with its winners and losers, would lead to service improvements. Many hon. Members were not convinced by that theory, and polls at the time suggested that the public were not convinced. However, the subsequent management failures and incompetence have exceeded the expectations of even the most cynical of us.

If the public were not convinced when the railways were privatised, they will be even less convinced that Conservative Members have their priorities right now or that they have the interests of the travelling public at heart. Conservative Members seem to be concerned most about the losses sustained by shareholders because of the operation of the very market mechanism that they introduced. Although no one wants shareholders to lose money, Conservative Members need to say clearly, as I hope they will in reply to this debate, whether they believe that the off-setting of shareholders' losses should be the priority call on public funds, ahead even of investing the same sums in improving services.

If Conservative Members are arguing that they would not have got into this situation, they have to say whether they would have written a blank cheque to Railtrack. If they would not have done so, what would have been the upper limit to their support?

Getting our railway system up to scratch will cost money, and it will be expensive regardless of which party is in government. We have to face that fact. The key point is that we have to be confident that the structure by which investment is delivered has the interests of the travelling public, our industry and our economy as its first priority and not somewhere down the list.

Conservative Members initiated this debate not to discuss priorities or the railways, but to try to get at the Secretary of State. Last week, the shadow Secretary of State said—it has been repeated by the Leader of the Opposition and, today, by the right hon. Member for North-West Cambridgeshire (Sir B. Mawhinney)—that the Secretary of State has "form". In alleging that, they have attempted to draw parallels between the way in which he has handled Railtrack and his handling of the Rover crisis last year, when he was at the Department of Trade and Industry. As I was pretty close to last year's events, if there are parallels to be drawn, I should like to share a few of my own recollections that are relevant to today's debate.

I recall that within 24 hours of BMW making that appalling announcement, the Secretary of State was in the region talking to BMW and the unions, and getting involved right from the word go. I recall that when most industry experts and Opposition Front Benchers were saying that Rover was finished and thousands of job losses were inevitable, he was one of the few people saying that we should try to find another way. I recall that when he acted in that manner he was attacked for interfering and meddling, much as Opposition Front Benchers have been trying to attack him today on Railtrack. However, were it not for his interference and that of a few other people, 20,000 jobs would not have been saved and MG Rover would not be the successful company that it is today. If parallels are to be drawn, my right hon. Friend's "form" bodes rather well for his handling of Railtrack.

My right hon. Friend is, of course, not the only one with form, and there are other parallels to be drawn between last year's events at Rover and this year's events at Railtrack. One is very clear. Last year, when thousands of jobs were at stake at Rover, the Opposition's priority was not to work out how to defend the jobs or to get the company back on its feet, but to engage in endless public tittle-tattle about who said what to whom and when they said it. Scoring party political points, both then and today, was and is not a means to the end of illustrating a serious political alternative; they have been seen by Conservative Members as an end in themselves. Scoring party political points is the precise purpose of today's Opposition day debate.

Despite Conservative Members' crocodile tears and everything that they say about investor confidence, I think that no one would be more pleased than them if their words and this debate further damaged investor confidence. Their objective is to score points, not to deal with the matter.

There are huge issues facing our railway service, including how to provide it with the necessary investment. There are huge issues about finding the right structure to deliver the interests of the travelling public and ensure that Great Britain has a railway service of which it can be proud. If we are to have a debate on those issues, we need a different approach from the Opposition. They had no credibility last year when they tried to discuss the car industry, and they have no credibility this year as they try to talk about Railtrack.

Photo of John Redwood John Redwood Conservative, Wokingham 6:07 pm, 13th November 2001

I have declared my interests in the register.

The Secretary of State finds himself in a dreadful situation. I echo the comments of my right hon. and learned Friend Mr. Clarke and my right hon. Friend the Member for North-West Cambridgeshire (Sir B. Mawhinney), who spoke with considerable experience, about how much more costly it is now going to be to sort out the problems of our railway industry, how much delay there will be in sorting them out and how much confidence this Secretary of State, on behalf of this Government, has knocked out of the relationship between the Government and financiers, bank managers, bond financiers and those who raise equity money.

It is right for people to ask what the Opposition would do. I am very happy to suggest what could be done in this situation, as it is clearly well beyond the skills and attention of the Secretary of State. The legal position, as I understand it, is that the shareholders of Railtrack, at group level, retain residual assets. They must make their own decisions on whether they wish to continue trading those assets in some form or sell them and rescue what little money they can from the group assets that are not in administration. They also have a clear interest in the administrator obtaining best value, if he can secure value, for the assets in administration. That is also the legal duty with which the administrator is charged.

The Secretary of State is not in control of that process, nor should he be. Those are assets that have been placed into administrative receivership and now have to be sorted out as best they can by the administrator. The sooner that they are sold on to an owner who can do something with them and set about rebuilding the battered balance sheet, the better it will be.

The Secretary of State is in danger, I think, of misleading his own Back Benchers. He implies that his model of the not-for-profit company is the one that will naturally emerge from the administration process. That is by no means clear. Labour Back Benchers may be disappointed to discover that bids are received, and they may be even more disappointed if one or other of them is better than any bid that can be put forward by the not-for-profit company. We still do not know who will sponsor the not-for-profit company, how it will write a prospectus, how it will raise cash, who will serve on it and what type of guarantees it or other bidders will receive from the Government.

I hope that the Government are in no doubt that they will have to offer fair funding to any bidders. They should, of course, first apologise for the mess that they have created, but the only sensible course that they can then follow is to state clearly to Parliament and the public, for the first time, what money is available to those who will be charged with the duty of running the Railtrack assets. Bidders will then be able to bid on the basis of greater certainty, and to ascribe a negative or positive value to the assets that are in administration. I fear that, in their current shape, the assets have a negative value, and that a substantial dowry will be required by whoever takes them on.

It is obvious that Railtrack's balance sheet must be strengthened. In answer to one of my questions, the Secretary of State said that he hoped that the new company would have an A credit rating. There is no way that Railtrack, on paper, could command such a rating in its current guise. I would expect the balance sheet to require a sum well above £1 billion of additional equity, or surrogate equity, which I think is the Secretary of State's preferred route. He cannot quite bring himself to admit that he must inject new extra capital into a company whose shareholders he has just helped to bankrupt, but he will have to put in that equity, or surrogate equity, of well over £1 billion to give it any chance of securing some kind of credit rating in the City.

The Secretary of State seemed to know that on 3 July, when, in rejecting the idea of the not-for-profit public interest company that had been suggested by some Members, he told the House that it would cost £2 billion to buy out the shareholders—we know that he does not wish to do that now—and another £4 billion to sort out the bond holders, because there is that amount of bond finance in Railtrack. When I asked him today, in the House, whether he proposed to wipe out the bond holders or whether he was effectively offering a Government guarantee for the £4 billion, he characteristically declined to answer; but the question is terribly important to assessing the cost to the Secretary of State of the forced administration of the Railtrack enterprise.

Then there are the costs of the administration itself, which are likely to be high. Given the phenomenal legal bills that the Secretary of State and his advisers must be incurring, and those incurred by those advising the administrator, Railtrack and the regulator—many of which will be a charge on public funds—I suggest that there will be no change out of £100 million for the fees of lawyers, accountants and others involved in reporting on the progress of Railtrack, and the amount could escalate well beyond that. I should be delighted if the Minister intervened to assure me that the Government have received quotes for all those charges well in advance and the amount will be smaller, but I think that it would be safe to pencil in well over £100 million—something similar to the huge fees that the Government are running up in the public-private partnership negotiations in regard to London Underground, which remain stalled and mired in difficulty and uncertainty.

There is also the cost control that the company itself was minded to implement, but that is probably not currently being implemented by the administrator. I estimate that at least £250 million of costs would have been saved in the trading year ending next March, and will probably not materialise because a degree of management has been removed from the company, and the administrator is taking things more easily in an attempt to find out what is there and how he can proceed.

We then come to the £800 million that has already been guaranteed by the Government. That was squirrelled out by a question asked by someone else; I was not told, although I asked a direct question that should have required that answer. Anyway, we know that £800 million has already been guaranteed, or has gone, to deal with the day-to-day bills of the company in administration—and, given the cash forecasts that we have heard from the Secretary of State, presented by the company before he made his decision, there may be another £650 million to go out before the end of the year. I am sure that the Government will feel that they must guarantee that in some way.

If we leave aside the £4 billion of bond holders' money—there are different ways of treating it, but according to the Secretary of State it should all be a direct charge on public accounts—we arrive at a total of £2.8 billion by the end of the year to try to keep the company going, and start sorting out the problems in administration. I suggest that that is well in excess of anything that the Government needed to give, or would have granted, to the company before it was put into receivership.

I have asked the Secretary of State to tell the House how much would have gone into the company this year and next if plans had continued under the 2 April agreement, but I have received no answer. I think that Ministers should tell us how much they had planned to put in, both directly and through the Strategic Rail Authority; what the timing of the payments would have been; and what extra amount they estimated might be needed on top of that. I find it extraordinary that Ministers could sign off on a going-concern audit basis in the summer of this year, and a few weeks later be scrambling around saying that the company would become insolvent and something drastic would have to be done.

My right hon. and learned Friend the Member for Rushcliffe made a more general point about the cost of this Secretary of State to the Government. Let us take just the transport element of private finance under the 10-year plan—£35 billion, perhaps £34 billion. If we assume that the cost of the Secretary of State's damage amounts to only an extra 1 per cent. per annum in interest to allow for the greater hazards involved in doing business with the Government now, we are talking about an extra £3.5 billion over a typical 10-year term of debt.

That would be the extra cost of financing a programme of this size, and that is just one element. The Secretary of State will have to stand accused of increasing the costs of financing a number of Government programmes. The Government anticipated large sums of private money for other transport systems, health, educational establishments, prisons and a wide range of other public facilities. There is no doubt, given the City's current mood, that the price has just gone up. Some very smooth talking, and the removal of the Secretary of State, will be required to reassure people and put the price down again. [Laughter.] I am glad that the Government think that a matter for so much hilarity, but the public are not amused.

This has meant a delay in vital investment in the railway industry. It has interrupted the progress of an industry that the Government themselves said was going rather better as a result of privatisation. Before the general election—in May, in Westminster HallKeith Hill, then a transport Minister, made a very good speech praising the growth in traffic, the improvement in investment and the new equipment that was coming to the railways—success that he believed had been achieved by the industry in privatised ownership since 1997. I found myself in full agreement with him. I did not confess that at the time because I knew that he had said those things because an election was coming up and he wanted to claim some credit for a Tory success a few years earlier. But I see that he is enjoying the situation now, because he knows that what he said was true, and that those who have taken over have made an awful mess. A new Secretary of State came in and overruled the perfectly sensible policy espoused by the hon. Gentleman and his then colleagues, causing the trouble that we are now seeing.

Time does not permit me to say much more. Let me end by saying that this Secretary of State is going to send a huge bill to the travelling public, the taxpayer and the Government as a whole. It is a disgrace and he should go. We need someone who understands how the market works, and how to raise the colossal sums that we need to get the railways on the move.

Photo of Clive Efford Clive Efford Labour, Eltham 6:18 pm, 13th November 2001

My right hon. Friend the Secretary of State was entirely right to take the public finance trough from under the Railtrack snout. His decision could be described as an admission of failure—failure to tame Railtrack, a monopoly created at the time of privatisation which separated track from trains. Since it was first created as a public body and later privatised, it has consistently failed to control its costs. More important was its failure to deliver on its obligation to provide an efficient and reliable network. The train operating companies will be relieved to know that their needs no longer have to play second fiddle to Railtrack's shareholders.

Railtrack was created in April 1994, and questions about its finances have existed ever since. That continued after privatisation in May 1996, despite assurances given by the then Tory Government. In 1995, there was concern about Railtrack's ability to meet its financial investment targets. In September 1996, the Rail Regulator introduced the "Network Management Statement", intended to ensure that Railtrack fulfilled its investment commitments, especially in regard to maintenance. In November 1996, half-year figures showed that Railtrack was underspending on maintenance and renewals. The regulator stated that that was wholly unacceptable. He repeated that again in the following January at a meeting with the directors of Railtrack and, again, in a letter responding to Save Our Railways. He said in that letter:

"As I said in December 1996 the current level of underspend"— on maintenance and renewals—

"is wholly unacceptable."

In May 1997, Railtrack published a further amended network management statement. The regulator responded by calling for greater public accountability from Railtrack and stated that he intended to alter its license to ensure that that was delivered. His statement acknowledged that Railtrack was a monopoly and that the regulator must provide a system of controls such as those that would be expected of a competitive market. After May 1997, the newly elected Labour Government announced their intention to introduce a new regime for the regulator to increase Railtrack's accountability.

There have been repeated reports of Railtrack's failures throughout its history. Numerous newspaper articles have warned everybody about the dangers of investing in Railtrack. As early as June 1996, The Economist discussed "The Railtrack Trap" and the arrangements to finance Railtrack that were set up by the Railways Act 1993. On 21 December 1996, The Daily Telegraph contained an article called "Watchdog in Attack on Railtrack Underspend." The Financial Times ran a series of articles early in 1997 with headlines such as "Railtrack Warned to Speed up Investment" and "Railtrack Investment Row Gets Up Steam". There is a catalogue of reports of Railtrack's failures.

We have had a constant stream of failures and attempts by the regulator and successive Governments to tame the Railtrack beast. However, all attempts failed because they tried to remould Railtrack into something that it was not set up to be. Public money was passed to private shareholders through a set up that was devised to do nothing but launder public money into private hands.

In April 2001, Railtrack received an extra £1.5 billion from the Government. Immediately, Railtrack used nearly £200 million of that to pay dividends to shareholders. The public's anger about privatisation is underlined by the Paddington and Hatfield crashes, which epitomise the effect of privatisation on our rail network. The public have no doubt where the blame lies. They know that profit was put before safety. That was epitomised when the former chairman of Railtrack sat with his colleagues in his office on the night of the Hatfield crash and emerged at 6 am to state that he was the only man to see Railtrack through the crisis. A few weeks later, he was handed £400,000 and he went out through the back door. It is clear that Railtrack was not set up to run an efficient railway, but was set up with only shareholders in mind.

On Second Reading of the Railways Bill in 1993, John McGregor, the then Secretary of State for Transport, said that the Bill was

"an historic change for the better in Britain's railway system."—[Hansard, 2 February 1993; Vol. 218, c. 156.]

He described Railtrack as an "entrenched monopoly" that had

"an instinctive tendency to ask for more taxpayers' subsidy and to feel that public subsidy will always be there as a crutch whenever things look difficult. Inevitably public ownership also brings with it the constraints of public finance, not least given the many competing demands on the public purse."—[Hansard, 2 February 1993; Vol. 218, c. 156.]

There is clearly not a competing demand on the public purse when public money is passed into private hands, but only when a public service is subsidised.

Railtrack has given us constant excuses for its failures to deliver. The Railways Act 1993 paved the way for rail privatisation. The first mention of the possibility of Railtrack's privatisation was made only in October 1992. If Opposition Members do not believe me, I am referring to a House research document that states that the first reference that was ever made to Railtrack's privatisation occurred in that month. However, an Act that effectively privatised Railtrack had been passed by the end of November 1993.

The reason for such undue haste is explained by a leaked memo from the then Chancellor, to which my right hon. Friend Mr. Meacher, who is now Minister for the Environment, referred during an Opposition day debate on 18 October 1995. He said that the then Chancellor of the Exchequer wrote to the then Prime Minister to ask for Railtrack privatisation to be speeded up because it was

"integral to the Budget arithmetic."—[Hansard, 18 October 1995; Vol. 264, c. 358.]

We were treated to the Conservative Government's money-raising exercise to finance pre-election tax cuts. That is why Railtrack's privatisation was rushed and botched, and why we are debating the matter today.

Tom Winsor offered Railtrack an interim review, as he stated when he gave evidence to the Select Committee on Transport, Local Government and the Regions last week. From 15 January, it was open to Railtrack to go back to Tom Winsor to ask for an interim review of charges to access railways. It failed to accept that offer until the weekend of the meeting with the Secretary of State, when it asked for that interim review to be carried out in 24 hours over a weekend. Opposition Members' entire argument appears to hinge on that single fact, which is a thin thread on which to charge the Secretary of State with misleading shareholders and mishandling the affair.

My right hon. Friend the Secretary of State ended Railtrack's repeated failures. Public finances cannot continue to pour into the private sector at the expense of an efficient rail service. I support my right hon. Friend's actions, which I hope will lead to an efficient public rail service that the people of this country have the right to expect.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport) 6:27 pm, 13th November 2001

I repeat, for the record, my declaration of interest. I hold shares in Railtrack, FirstGroup and Eurotunnel, and my husband works for an American airline company. Therefore, I share the sentiments of other hon. Members following yesterday's tragic plane crash and loss of life in New York.

Today, we have seen a classic case of the manipulation of evidence. It is time that the record spoke for itself. I especially refer to paragraph 765 of the evidence given by the Rail Regulator to the Select Committee on Transport, Local Government and the Regions last week. He said:

"I added that taking me under political control would go entirely against the grain of the major theme of the Government's policy position in the General Election campaign, which was about getting private sector capital into the provision of public services. I told them that such a step would do considerable harm to the ability of the Government to get companies to put money into public projects. I also mentioned the implications of the Human Rights Act 1968 because of the right of the citizen to have his civil rights determined by an impartial tribunal."

That was against the background of the Rail Regulator stipulating in a press statement on 12 June that Railtrack had the environment to confound its critics and to succeed.

The Rail Regulator told the Select Committee that when the Secretary of State told him that the Government had decided to put Railtrack into administration that weekend, he had said that he was

"very surprised at the circumstances as they explained them to me and the suddenness of the decision on railway administration. I explained that we at ORR had had no indication of any imminent insolvency from the company."

In paragraph 761, Mr. Winsor notes:

"Mr Byers said that they had thought of that"— an interim application from Railtrack—

"and that if such an application were made, he had the necessary authority immediately to introduce emergency legislation to entitle the Secretary of State to give instructions to the Regulator. After pausing to consider whether I had really heard what I had just heard, I asked whether that would be to over-rule me in an interim review or in relation to all my functions. Mr. Byers said that it would cover everything but that its first use would be in relation to an interim review which the Government did not want to proceed".

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

No, I will not.

In the devastating evidence that Mr. Winsor shared with the Committee, he admitted his surprise at the suddenness of the Secretary of State's decision to put Railtrack into administration, at the fact that the company's financial situation could have deteriorated so badly in so short a time and that his office had no inkling of Railtrack's impending insolvency. Mr. Winsor explained to the Secretary of State that, in his view, Railtrack would exercise its right to apply for an interim review to keep it afloat.

It is my firm belief, which the Secretary of State is free to contradict in the House, that he had effectively neutralised and neutered the power of the Office of the Rail Regulator, Mr. Tom Winsor, to process such an interim review. In fact, the Secretary of State had countermanded that application. He expected that Railtrack would make such an application and he fully intended to bring emergency legislation before the House to enable him to instruct the regulator.

In that well-thought-out, well-prepared, swift move, the Secretary of State completely neutralised the Rail Regulator and blew his independence out of the water. The implications and ramifications of that move are enormous and deeply alarming, both to the House and outside, for Railtrack as a company, for its shareholders and especially for the Office of the Rail Regulator. Furthermore, there are implications for the regulation of other industries.

The implications for the travelling public are clear. The question that the Secretary of State must answer in the House today, or perhaps tomorrow in the Select Committee, is: how can he give an assurance to train operators and investors that whatever the successor to Railtrack may be, it will be adequately funded and that that investment will be protected by an independent regulator?

Successive sectors have used this model: energy, telecommunications and transport depend on the role of an independent regulator for the smooth operation of the industry and for the ultimate protection of the interests of shareholders.

There are also ramifications for the public sector. Clause 24 of the NHS Reform and Health Care Professions Bill deals with the independent regulation of the health service and the reform of the General Medical Council, yet clause 25(2) provides—yet again—for power of direction to the Secretary of State to overrule the very independence of that regulator. That threatens the principle of the independence that the Bill is intended to create.

The inadequacies of the Secretary of State are well rehearsed. His lapses of memory are only too familiar, but his poor record in this matter is noteworthy: for example, his decision not to award a 20-year franchise to GNER, against the clear advice of the Strategic Rail Authority. The Select Committee heard in evidence that neither the Secretary of State nor any of the Department's Ministers had tried to hold a meeting from the date that the right hon. Gentleman took office to the date of the announcement of Sir Alastair Morton's retirement. That meant that the two major applicants in that east coast main line renewal spent £4 million apiece—a total of £8 million—in promoting their bid. At present, that money is not recoverable.

The cost of putting Railtrack into administration runs at £2 million a week—a cost to be met by the Government and thus the taxpayer. Following the demise of the independence of the Rail Regulator, one question remains to be answered. In the bidding for Railtrack—the new not for profit company, limited by guarantee—who will set the base line?

The Secretary of State may care to answer that question this evening, but is he the man in whose hands the travelling public want to see the future of the railways? The answer is no, and I beg the right hon. Gentleman to consider his position.

Photo of Eric Pickles Eric Pickles Shadow Minister (Transport) 6:35 pm, 13th November 2001

Before I begin my speech, I wish to associate myself with the remarks of my hon. Friend Mrs. May and the Secretary of State for Transport, Local Government and the Regions about the people of New York who continue to suffer. We all admire their bravery.

The debate got off to a marvellous start with my hon. Friend's speech. There were distinguished contributions from my right hon. and learned Friend Mr. Clarke, my right hon. Friends the Members for North-West Cambridgeshire (Sir B. Mawhinney) and for Wokingham (Mr. Redwood), and my hon. Friend Miss McIntosh. We are grateful to her for all her hard work on the Select Committee, and especially for exposing the truth about these matters.

It is a cause of regret to the Opposition that the Secretary of State has not seen fit to be in the Chamber much today, and in particular that he is not here for the winding-up speeches—[Interruption.] Ah, here he is! I am glad that he has made it; we can all be late.

I have felt a little sorry for the right hon. Gentleman—[Interruption.] No, I have, because we have made history today. This is the first ever vote of no confidence in a member of the Cabinet and not a single member of the Cabinet thought fit to turn up to support the right hon. Gentleman. He said that he had sent a message to his colleagues: "Don't come today, you've got more important things to do." I am sure that we would all like to see that particular e-mail.

We knew that the right hon. Gentleman was in trouble when he tried to present himself as a Gucci-suited class warrior, talking about the fat cats and reeling off sums of money—the many millions of pounds of bonuses—yet those sums pale into insignificance against the amount of extra interest that we shall all have to pay for our infrastructure projects because of the Secretary of State.

The right hon. Gentleman failed to answer the principal question: on 5 October, when did he first receive the information from the Treasury that it was not prepared to fund Railtrack? On 5 October, did he receive information from the Treasury: "Well, basically Steven, do whatever you like. If you want to give it billions of pounds, we are right behind you"? I do not believe for one moment that the Treasury said that. The right hon. Gentleman should understand that, sooner or later, we will find out the date and that from that point on he will have been guilty of creating a false market in shares. Sooner or later, that date will come out—[Interruption.] In reply to the Whip, Mr. Caplin, I am certainly on the side of the workers who have been robbed of their savings by the Government.

As the Secretary of State is thought to be relying on his notes of 25 July, he has no alternative but to place them in the Library. We look forward to being able to study his version of the minutes. We have seen everyone else's minutes for that date, so we should see his.

The right hon. Gentleman made a great statement that he did not feel that he threatened the regulator and that he should be acquitted of that. As one of my hon. Friends said, we do not think that the right hon. Gentleman is a physically imposing or intimidating person. Even if he took a dose of steroids, we would not find him very frightening—as might have been the case with his predecessor. We were interested in the substantive point of whether or not he had promised to produce legislation. We now know that he said that he would produce legislation.

Let us be blunt with the right hon. Gentleman. He said no to the House when he should have said yes. At the very least, we should have received a qualified no. We completely accept that the right hon. Gentleman did not threaten the regulator. Instead, he chose the well-trodden path of the Corleone family, by making the regulator an offer he could not refuse. Railtrack is in administration because the Government refused to provide additional public money, as was their right. More importantly, Railtrack is in administration because other modes of finance were cut off by the Secretary of State. No one can save Railtrack because the Secretary of State was determined—

Photo of Eric Pickles Eric Pickles Shadow Minister (Transport)

I will not give way to a part-time attender of the debate. The hon. Gentleman cannot expect to swan in at the beginning and then again at the end. I am not taking interventions from someone who has not had the courtesy to attend the debate. He can sit down.

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation

On a point of order, Mr. Deputy Speaker. The reason I left the Chamber after Mrs. May had replied to my intervention was because she inadvertently misled the House. I have been to the Library to get the facts—

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. The hon. Gentleman has been here long enough to know that that is not a point of order. He must find other ways of pursuing matters of debate.

Photo of Eric Pickles Eric Pickles Shadow Minister (Transport)

I am sure that the hon. Gentleman is a quicker speed reader than that.

It is the same offer that the Government made to the court—

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. It is perfectly clear that Mr. Pickles is not giving way.

Photo of Eric Pickles Eric Pickles Shadow Minister (Transport)

I would give way to anybody who has attended the debate.

It is the same offer that the Government made to the court. With the removal of the independent regulator, the company exists at the whim of the Secretary of State.

Photo of Louise Ellman Louise Ellman Labour/Co-operative, Liverpool, Riverside

Is the hon. Gentleman suggesting that he would give additional funding to a company that has a predicted deficit of £700 million by December and £1.7 billion by next March—an uncontested allegation?

Photo of Eric Pickles Eric Pickles Shadow Minister (Transport)

The hon. Lady earlier made great play of the west coast main line. On 8 October, the Secretary of State was due to receive from Railtrack a solution to that problem. When, in about 10 years' time, the hon. Lady is still receiving complaints from her electors, we will have to remind them that she supported a decision that meant that money for phase 2 of the west coast main line was not made available.

There is a gap in the Secretary of State's story. Mrs. Dunwoody said that

"frankly, there is a gap, but I don't know it is quite as artificial as anyone is making out."

Given that the next capital project is to be the underground, perhaps the Government are realising that "mind the gap" might be a good way to remind themselves of how their capital projects are going.

My right hon. and learned Friend Mr. Clarke was right to ask where the missing £34 billion will come from. Most will rest on the back of 15 special purpose vehicles to create a mixture of public and private finance. Few have any realistic chance of getting off the ground in less than two or, more likely, four years, by which time the problems will be much worse. That means the delay or cancellation of projects. Goodbye west coast main line; goodbye Thameslink 2000; goodbye improvements on South Central. The result?—stagnation of the railways, low investment and fewer passengers.

Photo of Eric Pickles Eric Pickles Shadow Minister (Transport)

The hon. Gentleman has attended the debate so of course I will give way.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I travel on Thameslink every day and I understand that Thameslink 2000 was to have been finished by 2000 under privatisation. Is that successful privatisation?

Photo of Eric Pickles Eric Pickles Shadow Minister (Transport)

If the hon. Gentleman travels on Thameslink every day, he must realise that he will be later and later and that he will have to get up earlier to arrive in this Chamber. That will go on for years. I wish the hon. Gentleman many years in this Chamber, but I guarantee that when he retires, which I hope will be many years from now, he will have seen no improvement.

There will be fewer passengers, less freight and higher fares; in other words, welcome back British Rail.

Photo of Eric Pickles Eric Pickles Shadow Minister (Transport)

I have told the hon. Gentleman that he did not attend the debate and I am not satisfied by his explanation.

We know that the senior civil servant within the Department said in a meeting with Credit Suisse First Boston in July that the movement towards a non-profit company was neither "appropriate nor attractive". We know that Mr. Winsor told the Select Committee that he warned the Secretary of State that this would affect public-private partnership deals. Hospitals, roads, railways and airports will all be affected, as my right hon. Friend the Member for Wokingham said.

We all know that the next PPP deal will be the underground. Interest rates alone will cost an extra £10 million because of the incompetence of the Secretary of State. When we think about the number of hospitals and roads on top of that, we can appreciate the full extent. We know that Ministers have absolutely no interest in the shareholders or the employees of Railtrack. They realise that 92 per cent. of the employees of Railtrack own shares. Overnight, a grade 1 signaller took a pay cut of 9.4 per cent. For clerical staff, 6.1 per cent. of pay was taken away by the Government.

Let one family speak for them all; a Mr. and Mrs. Byers. They are pensioners who invested £3,500 for their old age and nursing care. They have said that their lives are "absolutely ruined". I suspect that the right hon. Gentleman who bears the same name will also bear the responsibility for his career being ruined.

We have read the views of an anonymous Minister, who is not here today, but who, I understand, is a member of the Cabinet. He told The Independent:

"It's not Tony's style to bow to external pressure to get rid of a Minister but nor is it his style to keep a discredited one in the longer term. And, let's be honest, a Cabinet Minister's job is not as safe as a spin doctor's."

The Secretary of State must realise that he represents the single greatest obstacle to investment in the railways. Let us put it simply. The City no longer trusts the Government and the public no longer trust their money with the Government. The Government now have the great task of raising the sums necessary for the railways, but they cannot do so with the Secretary of State at the helm. He must now go.

Photo of John Spellar John Spellar Minister of State (Department of Transport, Local Government and Regions) (Transport) 6:47 pm, 13th November 2001

First, I wish to associate myself with the comments made by others regarding the tragedy in New York yesterday and the impact that that will have on the aviation industry and those who work in it, many of whom are our constituents.

This has been an interesting debate—

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation

I am grateful to my right hon. Friend for allowing me the opportunity to intervene at this point. When I intervened on Mrs. May to ask whether she believed that Railtrack had made a sufficient contribution to rail safety and the reliability of services in return for the money it received from the Government, she said that rail safety had improved since privatisation. The Library has provided me with figures showing that the number of fatalities grew from eight in the year prior to privatisation to 43—[Interruption.] It may be a laughing matter for Conservative Members, but it is not for the families of those who died. There has been a fivefold increase and if the hon. Lady looked at the brief from the Library—

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. Interventions must be brief, particularly at this stage of the debate.

Photo of John Spellar John Spellar Minister of State (Department of Transport, Local Government and Regions) (Transport)

My hon. Friend's point is well made.

We were pleased to hear my hon. Friend Mr. Hall gaining his voice, and I was pleased to hear my neighbouring colleague, my hon. Friend Richard Burden, putting the record straight on Railtrack and BMW. [Interruption.]

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. The House should hear the winding-up speech in silence, which we have not had so far.

Photo of John Spellar John Spellar Minister of State (Department of Transport, Local Government and Regions) (Transport)

My hon. Friend Clive Efford ably represented, once again, a significant part of London's commuterland.

There were one or two interesting revelations. Mr. Pickles wished my hon. Friend Mr. Hopkins a long period in the House, which shows an accurate reading of the opinion polls and the future prospects of the various parties. Alarmingly for those who sell hair dye, the hon. Member for Maidenhead revealed that she prefers mature men. There will be an instant reduction in the use of hair dyes and a great proliferation of grey hair around the Chamber in the coming days.

The debate was also interesting for the fact that we have wasted half a day when there are so many other issues that could be discussed—issues on which, at business questions, Opposition Members have demanded debates. Last week, Mr. Hayes asked for a debate on arable farmers, Mr. Mitchell for one on health, Mr. Hogg for one on the House of Lords, and Mr. Wilkinson for one on London. All those might have been more appropriate subjects—they are all important. The previous week, the right hon. and learned Member for Sleaford and North Hykeham asked for a debate on the Crown prerogative, Mr. Barker for one on civil defence and the right hon. Member for North–West Hampshire (Sir G. Young) for one on the economy. All those were more significant issues.

An extremely interesting aspect of the debate was Opposition Members' failure to mention certain subjects. I heard precious little mention of passengers, of freight, or of the industry, but an awful lot of talk about a small section of the City—those who bought Railtrack shares recently, while others in the City were selling them those shares. That is a very small constituency—but it is the one to which the Conservative Opposition largely address themselves.

Let us deal with the underlying facts. Railtrack did not oppose our petition to the High Court for administration because it recognised the strength of the case. Our evidence to that court showed a deficit for Railtrack of £700 million by 8 December, rising to £1.7 billion by March 2002. Faced with those facts, the court—not the Secretary of State—in the person of Mr. Justice Lightman, said:

"this is clearly a case where the making of an order is not only appropriate but absolutely essential. I shall therefore make the order immediately."

Therefore Railtrack, in its current form, was not part of the solution for our railways but a major problem, and a very expensive problem at that.

During the debate, I was amazed by the cavalier way in which the Opposition treated public money. Mr. Clarke, Mr. Redwood all seemed to be quite easy about substantial but unspecified sums of public money being thrown around. The right hon. and learned Member for Rushcliffe—in a term used in the debate—has form in that. After all, during the time when he was Chancellor we nearly doubled the national debt.

Photo of Kenneth Clarke Kenneth Clarke Conservative, Rushcliffe

As the right hon. Gentleman was listening to my speech, he will recall that I was concerned about the delay to future investment in the railways and the cost to future investment and the prospects of raising private investment, after all these incidents. Does he expect the west coast main line refurbishment to have made any worthwhile progress by the time of the next general election?

Photo of John Spellar John Spellar Minister of State (Department of Transport, Local Government and Regions) (Transport)

I am very glad that the right hon. and learned Gentleman raised the west coast main line, a project which Railtrack originally budgeted at £2.3 billion. It is now an estimated £7 billion and rising. Railtrack's total failure to control its costs—[Interruption.] I shall tell the right hon. and learned Gentleman, and the right hon. Member for North-West Cambridgeshire (Sir B. Mawhinney), about the attitude of the City of London. Both the Secretary of State and I have had many meetings with a range of financial institutions about the London underground and other areas, and they believe that those are good business prospects and are keen to be engaged in them. That is the reality, contrary to the scare stories that are being put around by the right hon. and learned Member for Rushcliffe and his colleagues.

Photo of John Spellar John Spellar Minister of State (Department of Transport, Local Government and Regions) (Transport)

If the right hon. Gentleman will wait a minute, I will come to him.

The right hon. and learned Member for Rushcliffe is not alone. We also have some questions to pose to the hon. Member for Brentwood and Ongar and the right hon. Member for Wokingham, who talk a lot about compensation. I simply ask them, compensation to whom, compensation for what, and how much? We have heard about the loss of shareholder value. The value of the company decreased from some £9 billion at its peak to £1.5 billion even before the events we are discussing.

I give way to the right hon. Member for Wokingham. I hope that he will now answer those questions: to whom, for what, and how much?

Photo of John Redwood John Redwood Conservative, Wokingham

As the Minister should remember, I said that the cheapest option now was to sell the assets back to the private sector and to have limited but agreed funding. Does the Minister agree that that is the best answer or is he effectively going to renationalise, and, if so, how big will the massive bill be?

Photo of John Spellar John Spellar Minister of State (Department of Transport, Local Government and Regions) (Transport)

The right hon. Gentleman has totally failed to answer the questions that I asked him. The administrator will have to examine the assets within Railtrack and that assessment will determine the value that is realisable for the Railtrack shareholders. The question that I posed to the right hon. Gentleman, and which none of his colleagues has answered, is how much public money would they put in to pay the shareholders? That is the question that they must answer, and they have not answered it tonight.

During the debate, much weight has been placed on the comments of Tom Winsor. My colleague and hon. Friend Mrs. Ellman ably quoted some of the evidence about more recent events. However, let us consider what Tom Winsor said about Railtrack—the company that is obviously the jewel in the Tories crown, the apple of their eye. In his speech of 12 June, just after the Secretary of State and I entered our current posts, he said:

"I believe the answer is found in the mistakes of a rushed privatisation with too many corners cut, weak regulation and a company which squandered its skills base whilst neglecting the condition of its physical assets. And it did not happen suddenly.

The seeds of Railtrack's present predicament—and that of the whole railway industry—were sown in 1993-7"— who was the transport Minister during part of that time?—

"when the industry was being restructured and prepared for privatisation. In those years, time and again, when there was a choice between protecting the public interest and promoting proceeds of privatisation, the latter was given a higher priority. The theory was—if there was one at all—that Railtrack would be responsive and competent, and would see its own interests coinciding with those of its customers and public interest . . .

Railtrack pursued an agenda which, in too many respects, left the dependent customer in the lurch. It sometimes appeared that it mattered more that Railtrack was the darling of the City of London rather than a supplier"—

Photo of John Spellar John Spellar Minister of State (Department of Transport, Local Government and Regions) (Transport)

It is Opposition Members who have been quoting the Rail Regulator with such approval throughout the debate, so I am surprised that they are so concerned when I quote other words of the Rail Regulator, many of which he reiterated in his evidence to the Select Committee.

Photo of John Spellar John Spellar Minister of State (Department of Transport, Local Government and Regions) (Transport)

I will not give way.

Finally, the Rail Regulator said—illustrating well the on-going problems that there had been with the company—

"The company should put away the begging bowl, and stop spending valuable management time hawking themselves unwanted round Whitehall, and knuckle down to getting train services back to a sustainable level of reliability and quality of service."

We certainly did not hear much from the prosecution—the official Opposition. What we did hear certainly was not Perry Mason. I have just quoted a devastating indictment of a failed company, brought about by a political action by a previous Government. What this second debate on Railtrack has shown is history repeating itself as farce—and boring, repetitious farce at that. What was new this evening was not relevant and what was relevant was not new.

It is a shame that we do not have a procedure in the House for recording no confidence in Her Majesty's Opposition. I therefore have no hesitation tonight in being equally repetitious and repeating my closing remarks in the debate a fortnight ago.

The general elections of 1997 and 2001 showed that the voters believed that the Tories were not fit for government. Once again today, they have shown that they are not even fit to be the Opposition.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 152, Noes 394.

Division number 57 Railtrack

Aye: 152 MPs

No: 394 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—

The House divided: Ayes 335, Noes 193.

Division number 58 Railtrack

Aye: 335 MPs

No: 193 MPs