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Westminster Hall

Tuesday 1 May 2001

[Mr. Michael Lord in the Chair]

Rail Investment

Motion made, and Question proposed, That the sitting be now adjourned.--[Mr. Jamieson]

9.30 am

Mr. George Stevenson (Stoke-on-Trent, South): I am extremely grateful to have the opportunity to debate rail investment. It is probably one of the most crucial issues that face the country and the Government. Given recent changes--what some may call developments--particularly in the Government's relations with the Strategic Rail Authority and Railtrack, it is a timely debate.

The Government are to be congratulated on having the courage and determination to publish their 10-year transport plan. Massive investment is planned for the railways; about £60 billion of public and private money will be invested during that period. The Government's main objective since the establishment of the SRA is to bring cohesion to the industry following the disastrous privatisation embarked on by the previous Government. It is in the public interest for the Government to oversee and direct that investment, if for no other reason than that enormous amounts of public money are involved. The public have an interest in the future of the railway network, and the investment that the Government are committed to making needs to be high on the agenda of the SRA.

Privatisation was a disaster, as it led to the fragmentation of the industry. It is beyond peradventure that that is the core of the problem that the industry now faces. It is not only I who say that; Railtrack and the SRA say so. Indeed, in its recently published document on strategy, the SRA unequivocally says that fragmentation was a disaster and that Railtrack has failed.

The other element that the Government need in order to develop the rail network over the next 10 years--and longer; we need always to think in the long term with the railways--is partnership. Partnership with the private sector, with the industry itself and with all the players is crucial. I shall return to that element of the Government's approach in a few moments. Partnership will deliver the necessary investment; it will enhance our railways, promote them and make them more efficient and effective. Crucially, it will increase passenger numbers and develop freight transport on the railways.

The Government's vision is shared widely in the House and throughout the country. Their courage and determination to put in place the necessary resources have been well received by the country. If we compare that with the previous Government's record, we can see how vital this Government's initiatives are. Some hon. Members in the Chamber know more about the industry than I ever will, and I have never quite understood how one can argue that we can have economic growth without the transport system to back it. The Government's approach is, therefore, critical.

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The available resources and the Government's determination must be matched by confidence in the partners that the Government seek to bring into the 10-year plan and in their ability to deliver. It is crucial that the industry's structure is clear and cohesive; it must be simplified. In particular, the blight of the fragmentation that followed privatisation must be tackled. As a result of their policy initiatives, the Government have a golden opportunity to set a positive framework for the industry.

The SRA is a critical factor in that process, and progress has been made. More stability is being brought into the franchises, which now last longer. That means that the partners--the train operating companies--can see their way more clearly to embarking on vital investment. They can see that greater stability is emerging. The SRA is also involved in a determined and strong effort to develop the critical partnership to which I referred. That is the plus side, and the Government are rightly to be congratulated on their courage. Despite the carping criticism that one hears from time to time from different quarters both in the House and outside, I believe that the Government's initiative is welcome.

However, I fear that there is a downside. The crucial objectives that are set out in the 10-year plan can be fatally damaged by one of the partners in particular--Railtrack. I have read as much as I can put my hands on and have informed myself as best I can. It is difficult not to come to the conclusion that there is no confidence in Railtrack. That is true throughout the industry and the country, among many hon. Members and, I am sure, in the Government. It is equally true within the SRA, the train operating companies and even Railtrack itself. That is the bottom line. I fear that prospects are unlikely to get any better. The critical partnership that the Government must develop could therefore be fatally flawed.

The problems that we face as a result of the lack of confidence in Railtrack are starkly illustrated by the west coast main line. Railtrack's network licence sets the tone. It states that Railtrack is charged with "(a) the maintenance of the network; (b) the renewal and replacement of the network; and (c) the improvement, enhancement and development of the network". Railtrack looked at the west coast main line and said, "We'll do it, but it will cost £2.3 billion." That did not last long. Quite unilaterally--without consulting anyone, in particular the Government--Railtrack changed the specification of the signalling on the west coast main line, and the cost went up to £5.8 billion. Recent announcements suggest that it has gone up to £6.3 billion.

What has been Railtrack's attitude in the light of that situation? Pretty clear, going by evidence that it has given to the Transport Committee, of which I have the privilege of being a member. In questioning on 22 November 2000, Mr. Marshall, formerly finance director and now chief executive of Railtrack, said that the modernisation of the west coast main line would not go ahead if the Government, through the regulator, did not provide a grant of £4 billion. Railtrack will simply turn its back on a vital rail artery of the country, for which it is responsible under its licence, unless the Government and the public purse fund it all. It is not just

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a matter of £4 billion. In further questioning, Railtrack admitted that if it did not receive that grant, not only would the scheme not go ahead, but it would have to raise the money on the capital market, and embark on a £1 billion rights issue. In effect, it was saying to the Government, "We want £5 billion from you, or you will not get the scheme."

Some people may think that that is a good illustration of partnership, but it is not one that I recognise. It gets worse. It is interesting, when we consider the Government's decision to hand over enormous amounts of public money to Railtrack, to look at the stock market valuation of Railtrack. The latest figure that I have--I think that the share price has gone down since, then staggered up a little--is about £5 billion. For one scheme, the public purse has to give a private monopoly company approximately the total value of that company. The net proceeds of privatisation, according to the House of Commons Library, were £4.6 billion. So we are giving this private monopoly company more money than the public purse received for the entire privatisation of the industry.

What do we ask in return? We ask--some might say demand--a number of things. The first is that Railtrack be better managed. We all subscribe to that. Railtrack has said that it is in danger of losing its A credit rating, which would compromise its ability to raise money. The Government have therefore decided to bring forward the first instalment of the £4 billion and to cough up £1.5 billion to prop Railtrack up. As a quid pro quo, they want to appoint someone to Railtrack's board to look after the public interest.

Mr. Marshall's response, as reported in The Times of 3 April 2001, was that such a

So, the conditions are better management and a public interest non-executive director, which Railtrack sees as symbolic and wants to appoint anyway. Interestingly, and quite critically, the Government and the Strategic Rail Authority have said that one of the problems with Railtrack is that the company has too much to do. They think that, in future, Railtrack should manage and maintain the existing rail network, and the Strategic Rail Authority, in partnership with the private sector, should take on the development of new rail links--after the development of the west coast main line, if that ever happens.

To that end, the Government have unceremoniously dumped Railtrack from the second phase of the channel tunnel high-speed link. That is not a ringing endorsement by the Government or the SRA of Railtrack's ability to deliver.

Now the Government and the SRA are looking for another development plan for the east coast main line. However, the Government have not left matters there,

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and I understand the difficulties facing them. The issues are so critical to the 10-year plan that they must be tackled, and I hope that, in the short time left to me, I can convince my hon. Friend the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Streatham (Mr. Hill), at least to commit the Government to tackling them.

Lord Macdonald was worried because the share price of Railtrack was going down further. The shares had been sold at £3.90 and had gone up to £17, but they were back crawling along the bottom again. That was not good enough. Something had to be done to boost the price, so the £1.5 billion prop-up, bail-out grant was made, and Lord Macdonald made a speech at the Birmingham chamber of commerce, in which he said that the Government supported Railtrack and saw it as an important partner for the future. What happened? The shares blipped up in price.

It is an unedifying prospect. Every time a member of the senior management of Railtrack makes a speech, the share price goes down, and every time a Government Minister makes a speech, the share price goes up. That is a new experience for many of us in the Chamber. How can such a relationship be a basis for the crucial delivery and the partnership that are required for the Government's 10-year plan? It is not a partnership and it cannot form a basis for future action.

The evidence on fragmentation is overwhelming. With the greatest respect to the Minister, this is not an old Labour versus new Labour argument; it is about what is right and what is wrong. The argument is about public interest, delivery, confidence, public and private money and partnership. It is a matter of our ability to deliver and our confidence in doing so. The debate is essential to the Government's having any chance of success.

However, the SRA's new role is not very encouraging. The new development of rail is being transferred from Railtrack to the SRA and other partners--I presume with Government approval. That means another fragmentation of the industry. Railtrack will maintain the current rail network and the SRA's private partners will develop the new network. The industry needs further fragmentation like it needs a hole in the head. I am very concerned about the prospect of further fragmentation.

Nevertheless, if the SRA, with its partners, is to be responsible for development of new rail infrastructure, that responsibility should be significantly extended. As a start, the SRA should take shares in Railtrack on behalf of the public. Am I saying that, or is it someone else? In the evidence to the Select Committee to which I referred, the then chief executive of Railtrack and its current director, who was then the finance director, said:

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I was enormously encouraged on reading an article in The Guardian. It was not always correct, but was nevertheless interesting. According to it, my right hon. Friend the Secretary of State for the Environment, Transport and the Regions is considering a British National Oil Corporation solution. That would be to take a 51 per cent. majority share in Railtrack, which would protect the public interest and mean a new direction for Railtrack. I think that the solution has much to commend it, with reference not only to my arguments today but to answers that my hon. Friend the Minister gave about the sum of public money put into Railtrack. He said:

For the one scheme in which Railtrack is now involved, the west coast main line, 100 per cent. of the capital comes from the Government. A large proportion of the 90 per cent. of its operating revenue also comes from the public purse. As things stand, we intend to allow that situation to continue. That is a private monopoly that is publicly funded.

The majority of shares should be acquired by the Government, quid pro quo for public money. That is the only way to get out of this mess. The shares should be invested in the SRA, as a step in the direction of restructuring the industry so that the SRA is responsible for the infrastructure while the private sector operates the trains. That should be done as soon as possible. We are witnessing the dismemberment of Railtrack, so my suggestion is the logical next step.

Railtrack represents the dead hand of privatisation. It is a luxury that we can no longer afford. Some in the industry legitimately and sincerely claim that they do not want any more upheaval. I understand that, but can we afford to stagger from crisis to crisis as we are doing now, and as many believe that we shall do in future? The majority of the public know that something dramatic must be done. They are fed up. When they begin to understand how much public money is at stake, they will become even more concerned. It is not always the case but, in this instance, public instinct is right. I hope that the Government will recognise that and act accordingly, as they have a historic opportunity to do.

9.54 am

Mrs. Gwyneth Dunwoody (Crewe and Nantwich): I wholeheartedly congratulate my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) on his customary trenchant and careful demonstration of his knowledge of this thorny problem. For many months, he has consistently obtained from members of the railway industry the information that is essential to understanding the tortuous and complex problems of that badly bedevilled form of transport. His success in doing that is a tribute to his sagacity and his complete understanding of how essential the railway industry is to the development of the United Kingdom.

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The Government now face real difficulty. It is a long time since anyone seriously set about considering the connections between transport and the economy. The Government took a major step in preparing a 10-year plan for transport. Not only that, but because they were happy to pass primary legislation and commit large sums of public money, they were beginning to tackle a 20-year pattern of neglect. However, consideration of the implications of those plans reveals an immediate dilemma. Because of the fragmented nature of the industry following privatisation, there is little to suggest where the industry thinks that it is going.

As we have been told this morning, the responsibility of the Strategic Rail Authority and of Railtrack is set down in transport legislation and involves not only promoting but developing the industry. Those are essential and fundamental tasks, but confusion and lack of clarity are now creating a dangerous situation. The impact of the rail accidents on industry confidence has been great--some would say almost disproportionate--but that has not been taken on board fully by all the major players. Railtrack's responses were set out in considerable detail before the Transport Sub-Committee. The previous chief executive seemed to understand that the company had not done sufficient in the past and that it would be required to do much more. The incoming chief executive, who was previously finance director, appeared better to grasp some of the immediate problems.

Nevertheless, time is passing and Railtrack has still not begun to come to terms with some of the difficulties that it needs to confront. First and most important is the public perception of Railtrack. Railtrack is the core of the rail industry. If it gets things wrong, whether in the maintenance of facilities or the development of the railway system, everyone else will suffer. Its representatives appeared to understand that one difficulty was that the steady state system had not been maintained as it had been previously.

We hear a great deal about 20 years of under-investment, but one thing that British Rail did was to maintain the system. Sometimes it did so with love and bits of string, but railway men and women maintained that system so as to enable it to continue in existence. When Railtrack officials came before the Committee we pointed out to them that their failure in that regard had endangered the system. We said that it was clear that the problems were not only affecting old-style rails; often they concerned parts of the system that appeared to have been renewed. It should have been possible to be confident that those parts of the system could take the new pressures.

I am concerned about the lack of evidence that Railtrack officials, who appeared at the time to understand that it was their failure to confront matters that had led to complications, have taken major decisions essential to its future security. A new director with engineering experience was appointed to the board, but it is extraordinary that for so many years engineers were not on the board, and that there were 13 directors without such practical experience. After appointing the new director, Railtrack appeared to feel that it had dealt sufficiently with the practical problems of development. It is essential, however, that Railtrack admits some straightforward, important things. It must understand that it failed to deal with basic questions about its

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contractors, about its acceptance of the fact that responsibility was passed down the line without sufficient monitoring, and about its inability to know whether the standard of maintenance that was required was being delivered by those who were paid to do that job. If it continues to get such questions wrong, it will simply go out of business, because there will be no way of maintaining its share price or the confidence of anyone in the City and in the general public in its ability to do the job.

So what has Railtrack done? Has it created an in-house engineering system, sought a new training system, asked the contractors to come up with a different way of working, or changed its way of awarding contracts? No. What it appears to have done is to decide that having one engineering director on the board will begin to confront its problems. As we demonstrated in our report, because it did not know how to handle contractors or have sufficient people to monitor what was happening, and because, from its commercial point of view, it was prepared to drive down the overhead cost of contracting by continually moving work from one firm to another--even moving it from one region to another--Railtrack contributed to the factors that led to the problems immediately after the bad accident at Hatfield.

I am very disappointed, because I believe that Railtrack was under an obligation to say, "Fine, we are under considerable pressure, but we are now prepared to take a number of basic, important steps." It must agree to look at training and at why it was not able to provide inspection without relying on someone else, and accept greater supervision from Her Majesty's railway inspectorate--an essential recommendation. It must also talk seriously to the train operating companies about how it can become more accountable to its customers. It is extraordinary that so many people can be required to work together in an industry with no obvious means by which they are accountable to one another for the quality of services delivered. That situation is reprehensible and dangerous.

Mr. David Drew (Stroud): Will my hon. Friend comment on the Wessex franchise? The ridiculous situation arose a year ago when Wales and West announced that it was not interested in continuing the franchise. Confusion has now followed about who will take over the franchise and invest in that network.

Mrs. Dunwoody : I sympathise with the people affected in that franchise area. They must have considerable worries about the future of the service. This afternoon my Committee will question Sir Alastair Morton on the long-term plans of the Strategic Rail Authority in relation to franchises. Some time after the franchise process was supposed to have begun, considerable confusion still exists about who will get which franchise, under what conditions, and what will be delivered in return. If the SRA is not able to demonstrate a clear plan, it is difficult to see how it will award franchises. If it does not know what it wants of the railway industry, how can it say what it wants individual franchises to deliver?

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When Stagecoach was re-awarded the franchise in the south-west, some of us felt that if that was the answer, it must have been a strange question. In many instances there is considerable confusion about the development of franchises. Railway companies and passengers are unclear about where we are going and what is required before a franchise can be awarded. I sympathise with my hon. Friend the Member for Stroud (Mr. Drew).

Many passengers will be worried that those companies that have not acquired new rolling stock, improved their services or delivered good facilities will nevertheless be considered for franchises on the basis of arrangements that will be unclear to those of us who use the service. Such arrangements may leave the travelling public dissatisfied.

If I may digress for a moment, it is extraordinary that those of us who suffer on the west coast main line, where one is unable to catch a train that arrives anywhere near to timetable, will be asked to pay a 10 per cent. fare increase. There are few industries in the United Kingdom in which one could get away with cheerfully saying to one's customers, "I don't bring you the goods you want at the time you want in the way you want or in the place you want, but I shall now charge you 10 per cent. more for the privilege of using them." Virgin ought to bear that in mind. Some train companies have confronted that issue, but the west coast main line is still suffering.

So what are we suggesting? When the Committee examined the question of rail investment, it became clear that we have an extraordinary dichotomy at the centre of the system. Under the privatisation legislation, Railtrack was clearly never meant to be put into private ownership. It was meant to be the core of the system. All the private companies around it were supposed to operate on a different basis that allowed them to raise capital on the open market, which should have allowed them to deliver much higher standards than British Rail. However, the last-moment decision to throw the whole system open to private ownership caused enormous difficulty.

The only way in which Railtrack can obtain money is from the taxpayer. Although that money comes through the train operating companies, it is still our money. That is not a barrier to efficient working, but it does mean that train operating companies have special responsibilities, which they are not fulfilling. Following recent traumatic incidents, they have not shown sufficient vigour, clarity of vision or commitment to change to restore confidence in their ability to provide high-quality services. There has been no clear plan for training and no obvious confrontation of the fact that many of the plans that they put into operation did not provide the quality of service that was needed. There does not seem to have been clear monitoring of the management systems of their contractors or the people employed by their contractors. All those are essential if Railtrack is to operate effectively.

When the Committee pointed out that the Government must ensure that there is a genuine transfer of risk to the private sector in contracts reached with private sector partners, it was underlining something about which many people feel strongly. There is no logic in transferring assets to private companies on the assumption that they will shoulder the risk in the market and raise large sums of capital to provide better-quality

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services if, when it comes to the point at which they need to do such a thing, it is found that they must return to the Government and say, "We are terribly sorry. We are unable to do what we promised to do in the first instance and we want you to underwrite all our losses."

Many of us believe that Railtrack would not be where it is today in the City if it did not receive such Government support. It is because City firms believe that it is the taxpayer who coughs up for basic services when real difficulties arise that Railtrack enjoys its current share price. Frankly, that leads to the worst of all worlds. Railtrack is not being supported by the private sector, but nor is it receiving input from the state sector. With such input, there would be no need for a large return on assets before money is put into the system. Railtrack is being reduced to an enormous, muddled compact between Government and private industry that is not working and seems incapable of providing the future that we demand of a truly modern rail system.

Wherever one goes in the European Community, and whether one considers high-speed trains or freight, one finds that large amounts are spent on transport. It is clear that most highly industrialised countries accept that an efficient railway system is fundamental to their economies. Without it, people and goods are not moved efficiently, profits are not made and countries do not develop as nations, yet many years after the creation of a railway system that is essential to our future, it remains unclear what the situation in this country will be in, say, 10 years' time. Although the Government have provided the opportunity and support necessary to produce a modern railway system, confusion reigns among companies, the Government and passengers. Frankly, that is not acceptable in the new century.

The general public are not prepared to continue to accept such chaos. They were told that, after a period of discomfort, there would be new rolling stock, new facilities and new and better railways. They will demand that those facilities be delivered, but the point is that Railtrack is not delivering. It has not carried out even the elementary maintenance work for which it was created. It cannot expect to continue to enjoy the support of passengers and the Government unless fundamental changes are made. Perhaps the appointment of a particular director will have an effect, but in my view we have reached a rather more basic stage. The taxpayer is spending a fortune on a company that is manifestly not doing its job.

If Railtrack were forced to answer for its actions on the open market, in the manner of most private companies, it would be bankrupt. We must seriously consider alternative plans. If taxpayers are to pay, there should be delivery of goods and services at the level that they expect. If they continue to pay and pay and yet receive inferior service, their anger will increasingly be a matter for their elected representatives, rather than for the individual companies concerned.

This Government are the first to have sufficient guts and ability to try to confront the problems of the railway industry. It is no use stopping halfway along the line and saying, "We'd like to get to Crewe but unfortunately we've finished up in Birmingham."

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10.14 am

Mr. Peter Snape (West Bromwich, East): Hon. Members will be grateful to my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) for the opportunity to debate this important subject, although the debate has not proved particularly enlightening, in that we seemed to have gone round and round in circles. Bashing Railtrack is dead easy. It is true that it is not undeserving of a good bashing, but a discussion that is long on problems and short on solutions will not take us much further forward. The only solution of which I have heard apparently involves the renationalisation of Railtrack.

I must declare an interest in that I worked in the railway industry for some years before being elected to Parliament, and I am still a member of the National Union of Rail, Maritime and Transport Workers. Until 31 December last year, I was chairman of a major National Express subsidiary. I therefore have some experience of the nationalised railways. Although I did not work on the railway side of National Express, my colleagues left me in no doubt about what life had been like trying to operate in a privatised--perhaps, having listened to my hon. Friend the Member for Stoke-on-Trent, South, it would be more accurate to say semi-privatised--environment since the Railways Act 1993 was passed under the previous Government.

The flaw that I find in the debates that we have on the Floor of the House and in Westminster Hall is that we are bereft of any solutions other than demanding that the Government, having put money in, should assume control of Railtrack. I have bored the House on many occasions with stories of what life was like when the Treasury ran the railway industry. Whether under Conservative or Labour Governments, Treasury control did not lead to happy bunnies in the industry, and certainly did not create an industry of which the nation at large was massively proud. We are in danger of creating a myth that the publicly owned railway industry was part of a golden age in which all the staff walked round with smart uniforms giving cheery responses to members of the public, and all the trains ran on time. That was not my experience when I worked on the railways. Year after year, and decade after decade, the amount of investment that the Treasury decided to make available to the railway industry was always inadequate for the job that needed to be done, certainly in so far as modernisation was concerned.

There was one exception to that rule. In 1955, the Government--a Conservative Government, funnily enough--accepted a modernisation plan that was subsequently implemented by both Conservative and Labour Governments. We were rather distracted during the period of its implementation by the plans of Dr. Beeching, some of which came to fruition and some of which fortunately did not. Many of us who worked on the railways at that time were frankly incredulous at some of the decisions that were made when the investment tap was, for the first and only time, turned fully on. I remind hon. Members that with cash that is provided by the Government via the Treasury comes a certain degree of control as to how it must be spent. During the implementation of the 1955 modernisation plan--which was not completed until the late 1960s and early 1970s--a great deal of public money went into the industry, and the Treasury saw to it that everyone got to

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dip in the gravy. Consequently--I speak from memory but, I think, fairly accurately--there were no less than 33 different types of diesel locomotives, none of which were compatible with each other and many of which ended up in the knacker's yard within a decade because they were no good. Conservative and Labour Governments were equally guilty. As a result of their desire to see the money spread properly around the country, many of the decisions that were made, apparently with good reason at the time, turned out to be disastrous--certainly from the taxpayer's point of view.

I cannot honestly think that renationalising Railtrack--as my hon. Friends the Members for Crewe and Nantwich (Mrs. Dunwoody) and for Stoke-on-Trent, South apparently want to do--would lead to the kind of rail industry that they and I want to see. The one advantage of Railtrack being a private company is that it has access to money that is not from the Treasury. I realise that much of the money that it obtains, and plans to obtain in the near future, comes from the Treasury. Perhaps my hon. Friends believe that £1.5 billion will be sufficient to modernise the rail industry, but I very much doubt that. It remains to be seen whether Railtrack, given its new remit and new chief executive, will be able to accomplish the tasks before it. Continual attack on the present structure of the industry is not helpful. As my hon. Friend the Member for Stoke-on-Trent, South said, the last thing that many of the industry's workers want now is yet another reorganisation.

A prominent railway manager, who was fired for writing a book on the difficulties of railway operation in the 1960s, Gerry Fiennes, made the immortal comment that every time we reorganise, we bleed. The railway industry has been reorganising and bleeding for far too long. Concentration on reorganisation at the expense of passenger and freight services is one cause of low morale, although the barmy privatisation rushed through by the previous Government did not help.

Mr. Stevenson : My suggestion that the Government, through the SRA, should be the majority shareholder in Railtrack, was first proposed by Railtrack itself.

Mr. Snape : I do not want to be rude to my hon. Friend, but he cannot have it both ways. He spent most of his speech, understandably, attacking Railtrack and its managers. Now, he has isolated one statement that those managers made and said that they were right on that occasion. I think that they were wrong, because they made that statement for all the wrong reasons. They handled the company extremely badly, and made that suggestion as an escape route from their mishandling.

I am not sure whether any Minister as talented as my hon. Friend the Member for Streatham--albeit, if I may say so, a little unfortunate in the past few days--wants to accept responsibility for everything that goes wrong within Railtrack. Inevitably, things sometimes go wrong in a large organisation. If we are to get enough money into the industry to enable it to be successful, which we all want, a mixture of private and public cash is, in my opinion, the only way forward.

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The debate is about railway investment, but I will spend a couple of minutes touching on other aspects of the industry that also give cause for concern. Many TOCs have arranged to lease new trains. We should not fall for the propaganda of some of them about how much they are spending on those trains because the vast majority of the trains are leased. Although that is relatively expensive, the cost of the trains is borne by companies such as Angel and other leasing organisations.

There is a problem in getting many of the trains into service. It is disgraceful that so many new trains are lying in sidings up and down the country waiting for safety cases while passengers struggle on old, in some cases, slam-door rolling stock. Others that have had safety cases have been so poorly put together that they do not work. We have heard understandable screams of anguish from TOCs throughout the country that have had to take such trains out of service a very short time after introducing them, because the trains were not up to the job for which they were designed.

I am tempted to say that that never happened when British Rail Engineering built the trains. It certainly did not happen as often. The total collapse of investment in the railway industry in the run-up to privatisation is now reflected in the infrastructure and in the quality of new trains being introduced. In the last five or six years of British Rail, nothing but emergency routine maintenance was done to the tracks and no new rolling stock was ordered. That resulted in the virtual collapse of our indigenous railway manufacturing industry and a dependence on rolling stock manufacturers based abroad. The fact that manufacturers are based abroad does not necessarily mean that they are not up to the job, but that hiatus in the supply of rolling stock led to many of our current problems.

Those of us who take part in these debates are a fairly restricted group, and those who listen to them either on the Floor of the House or here must be thoroughly depressed and sick of the sight of us. However, we have one thing in common: we all want to see a better railway industry in the future. How best to make that happen is a matter that only the Government, Railtrack and the train operating companies can decide.

The last anecdote that I shall probably relate during my undistinguished parliamentary career will be one that my hon. Friend the Minister has heard many times before. I tell it only because on Friday I shall be going back to the signal box where I started my railway career in 1957 with a TV crew who want to show how I have fallen badly from grace from being a railway signalman to being a Member of Parliament. When I went to work as a 15-year-old train recorder in 1957, I was told that the signal box was about to be swept away in the west coast main line modernisation programme. The fact that it will still be there on Friday will, I hope, do something to undermine the case of my hon. Friend the Member for Stoke-on-Trent, South, notwithstanding the respect that I have for him. If the Treasury could never find the money in 50 years to shift Edgely junction No. 2 signal box, which was built by the London and North Western railway in 1888, I cannot see it happening at any time in the future. The job of all of us who care about the railways is to get the best deal possible for the industry. Flawed and fragmented though the present structure may be, we should try to make it work properly.

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10.26 am

Mr. Tom Brake (Carshalton and Wallington): I congratulate the hon. Member for Stoke-on-Trent, South (Mr. Stevenson) on securing the debate. He set out the challenges facing the industry and suggested possible solutions to the problem. The past decade or so has been relatively good for the railways, in spite of one former Prime Minister's fixation with the motor car. Passenger journeys have risen from 738 million in 1986-87 to 892 million in 1998-99, which is the last period for which figures are available. Investment has involved big sums of money--a total of £34.3 billion in the period 1991 to 2001 and, it is promised, £54.5 billion in 2001-11. That all sounds very impressive, but it is worth looking at some historical background.

I shall not go back as far as 1955 because I have no recollection of what happened then, but let us consider what the Labour party said in opposition. In 1993, the current Deputy Prime Minister said that the Tory rail privatisation Bill was driven by ideological dogma and that it commanded no support from experts or the public. I imagine that that comment is still quite fresh in the minds of hon. Members. The Guardian reported the right hon. Gentleman saying that the proposed privatisation would

Mrs. Dunwoody : He was not wrong.

Mr. Brake : Indeed. The Labour party maintained that stance throughout the passage of the Railways Bill and during the first few years after privatisation, and the now Deputy Prime Minister pledged to take Railtrack back into public hands. The 1997 Labour manifesto admitted that rail privatisation

I shall comment briefly on the Tories' position. I thought that the absence of any Tory Members at the beginning of the debate had to do with the shame that Conservatives felt about the state in which they had left the railways. Tom Winsor commented:

What Labour Members said in opposition is not nearly as interesting as what has happened since they came to power. We know that between 1997-98 and 1999-2000,

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there was a 25.6 per cent. reduction in the rail subsidy paid by the Government to the train operating companies. That is projected to continue to fall in the next couple of years. The subsidies were set up under the franchise agreements of the previous Tory Administration. The 10-year transport plan, which I say now that I welcome, to avoid criticism that I am carping, outlines the £60 billion that the Government will be spending on the railways.

The franchise replacement programme will be underpinned by extra Government funding, which is necessary as everyone accepts that the franchises were designed to deliver a basic service, to enable bidders to come forward. If the targets were too stringent, no bidders would have applied. Money has also been set aside for a rail modernisation fund.

The plan for the Strategic Rail Authority was originally to be published in May 2000, and it is now likely to appear later in the autumn, having been delayed in the aftermath of Hatfield. There are delays in the review of franchises and track access charges, with only two of the 18 new franchises having been decided so far. That is causing major delays in the investment plans of rail companies. The award of the franchise to GoVia, which is due to take over from Connex South Central is a subject that is close to my heart as well as to the Minister's, as we are commuters using the same service. The franchise process is complete and GoVia is supposed to be running that service, but it has not taken over yet. Perhaps the Minister can say when that will happen. I understand that negotiations are still taking place. The staff of Connex South Central believe that the company will run the service right to the end of its franchise, which will last another two or three years, but I hope not.

It is claimed that more will be spent on the railways in the next 10 years, but it is clear that no more public investment will be made. The amount of investment will be lower than in the final years of the Conservative Administration. The crucial issue is how much private money the Government can lever in. It is only through private money that the promised investment of £54.5 billion will flow to the railways. Is there any evidence so far of a railways renaissance? Very little, according to the latest edition of Rail, which I suspect some Labour Members read regularly. An article entitled "A new railway? Sometime ... we hope ... perhaps ... maybe ..." contains interesting quotes that reflect the views of key players in the railways industry. The EWS, for example, says that

Everything referred to in the article is running late, and I am not talking about the trains. Railtrack's network management statement has been delayed; the

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SRA is apparently not committed to delivering a single project before 2005; and the strategic plan, which is due in October or November, is running a year late. If we analyse Railtrack's network management statements, we find that the deadlines for the completion of urgent projects have been missed wholesale.

What is the solution to the crisis that the industry faces? First, the regulatory system must be simplified. The SRA is pushing the case for rail, and we would like the other aspects of transport to be integrated under a sustainable transport authority. We would ensure that that authority took the lead in using public investment to secure partnerships with the private sector. That would not necessarily involve Railtrack, and that model is beginning to emerge.

We favour a demerger of Railtrack. In practical terms, that would mean that a not-for-profit company ran the infrastructure--the track, signalling and power supplies. We and some Labour Members have suggested such a model for other modes of transport. We could achieve that by negotiating with Railtrack. Given the position that it is in, it must recognise that it is unable to do the jobs that are being asked of it, whether on-going maintenance or more innovative projects. If necessary, we could ask the Competition Commission to review Railtrack's activities. We certainly approve of simplifying the structure of the railway system and reducing the number of franchises. There are good grounds for encouraging Railtrack to pass on responsibilities for infrastructure renewal to the train operating companies, some of which have expressed an interest.

There must be scope within the newly negotiated franchise for further control over fares if we are to prevent dramatic increases such as those made by Virgin, which have, unfortunately, not been matched by any improvement in service. We support the recommendations of Lord Cullen's inquiry and would favour setting up an independent accident investigation body of the kind that exists for air travel. There is also scope for significantly increasing the amount of freight that goes by rail.

We have heard solutions from different quarters. We clearly agree on one issue. The system is not working, and the Minister will have to respond to that concern. The Government are under siege over transport--whether it is rail, air or tube. The lessons that arose out of the privatisation of the railways do not seem to have been learned. The tube is due to be partially privatised, possibly within the next 24 hours, against the opposition of all Londoners--and, for all I know, even of the Minister. We all know what has happened to air traffic control. The Government have one more opportunity to make their mark on transport. Their success at levering in private money and improving reliability will determine whether the likes of the Minister will retain his ministerial limousine or have to swap it for a bicycle.

10.40 am

Mr. Geoffrey Clifton-Brown (Cotswold): I congratulate the hon. Member for Stoke-on-Trent, South (Mr. Stevenson) on securing this interesting debate. It has already revealed division among

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Government Back Benchers on the future management of our railways. The problems that we face today are partly the result of muddle and confusion having been translated into the Government's strategic thinking on how to run the railways.

Mr. Snape : Will the hon. Gentleman give way?

Mr. Clifton-Brown : I will happily give way to the hon. Gentleman, because his speech was one of the most sensible.

Mr. Snape : I am condemned now. Would the hon. Gentleman prefer us all to be obedient Blair babes, or should we speak our minds?

Mr. Clifton-Brown : I am delighted that the hon. Gentleman is here. He has huge experience of the railways and brings a great deal to the debate. I am not sure whether he is standing for re-election.

Mr. Snape : I am not.

Mr. Clifton-Brown : He will be sadly missed by the House; we need people like him with a depth of knowledge. His anecdote about the signal box demonstrates the failure of Governments of all colours to bring our railways up to a satisfactory, modern standard. I am sure that he will have seen privatised railways throughout the world working satisfactorily--for example, in Hong Kong. Such companies can lever in private finance and go from strength to strength.

The Government's lack of strategic thinking has led to confusion and muddle for Railtrack, which has not been able to retain the confidence of its investors and has lost share value. We should get away, once and for all, from the continual, bickering call to bring it back into public ownership. The Government have had four years in which to do so. The Minister may tells us differently this morning, but the Government obviously do not want to bring Railtrack back into public ownership. They should state that clearly, and concentrate on their 10-year strategic plan, so that Railtrack and the other parts of the railway industry can bring in more private investment.

The Government inherited a railway system in which passenger numbers, freight traffic and investment were all increasing. Public investment has decreased from £1.8 billion in 1997-98 to £1.6 billion in 2001-02, yet private investment has gone up during that period from £1.2 billion to £3.7 billion. We have heard a lot of criticism of the railways this morning, but some excellent things are going on. For example, Angel Trains, in conjunction with Stagecoach and Siemens, announced in March a £640 million deal for new rolling stock for South West Trains, which could eventually be worth well over £1 billion. That is a significant sum of money, and it should be welcomed by everyone.

We have had one or two unfortunate incidents on our railways, which have highlighted the confusion and muddle. The Prime Minister visited the scene at Hatfield, and said that everything would be all right in the new year, and yet even after Easter, we are still suffering chaos and are not back to normal. The hon. Member for Stoke-on-Trent, South said that Railtrack's

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price was going up and down like a yo-yo. That points to what has been going on in our rail system. He said that we should take part of the shares in Railtrack back into public ownership, but did not really explain how that would be done. I do not think that it is a sensible way forward.

The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) said that we could not carry on as at present. She criticised several aspects of Railtrack's running of our railways but, with great respect to her--she has huge knowledge of the railways--I must point out that she did not suggest a strategic way forward. The hon. Member for West Bromwich, East (Mr. Snape) clearly said that we should not bring the railways back into public ownership. That must be right. Let us try to give Railtrack some hope and a strategic way forward. The Government, working with Railtrack, should come up with some proper targets, and should encourage Railtrack to meet them, rather than penalise it to ensure that it does so. Our infrastructure should be improved and run more safely. Signals should not be passed at danger and rails should not crack, because they should be improved and maintained to some of the best standards in the world, rather than some of the worst.

Since privatisation, the New York underground is considerably better than our public underground in London. That is the way forward. I wholly accept the plea made by the hon. Member for Carshalton and Wallington (Mr. Brake) that we should simplify the running of our railways. Since the Government came to power, all sorts of different regulatory, safety and other bodies have tried to tell Railtrack what to do. We have ended up with greater confusion than we had when we started.

We ask for clear, strategic thinking from the Government and their regulatory and safety bodies. We want to go forward into the 21st century with a modern railway system that befits the world's fourth biggest economy, not one that befits a third world economy and would be more suited to the century in which railways were invented. It is high time that our sophisticated country was able, with proper investment and infrastructure, to produce a railway system that can cope with a modern economy, that transports many people swiftly around the country on time in reliable trains, and that carries an increasing amount of freight. We all want that, as it would befit a modern economy, and be good for the environment and our people. We look forward to the Government producing a plan to deliver those results, or giving way to a Government who can do so.

10.47 am

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Keith Hill ): Let me begin by congratulating my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) on securing the debate and on the informed and reasonable way in which he made his case. I am also grateful for the contributions of my hon. Friends the Members for Crewe and Nantwich (Mrs. Dunwoody) and for West Bromwich, East (Mr. Snape), and those of the hon. Members for Cotswold (Mr. Clifton-Brown) and for Carshalton and Wallington (Mr. Brake). They all provided insights on this important subject.

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The debate has brought together great expertise, including that of both my mentors and gurus on transport as well as parliamentary matters. I pay an especially warm tribute to my hon. Friend the Member for West Bromwich, East, as this debate is likely to be his swansong in the House.

I want to talk about the positive developments in the railway industry, the new beginning that we have made with Railtrack, and the exciting employment prospects opening up in the industry. First, I shall deal with specific issues of ownership that several colleagues raised. Directly or by implication, my hon. Friends the Members for Stoke-on-Trent, South and for Crewe and Nantwich referred to the Select Committee's recommendation that the Government consider taking a majority equity stake in Railtrack, or taking Railtrack back wholly into public ownership. As they are well aware, my right hon. and noble Friend the Minister for Transport explained the Government's reservations about such proposals to the Committee.

Renationalisation would probably take a couple of years and involve complex and controversial primary legislation. During that time, the industry would effectively be paralysed. The initial costs to the taxpayer would comprise not only Railtrack's market capitalisation of around £2.5 billion at the current stock market valuation but £4 billion of debt liabilities. None of that money would buy additional rail investment. It would all go towards compensating shareholders and funding the company's debt. Renationalisation would also involve the public sector in directly funding Railtrack's investment. The additional debt through which the company currently plans to finance its activities would become public sector borrowing.

I share the conviction of Labour and Opposition Members that serious mistakes were made in the privatisation process. However, after years of fragmentation and instability, the answer is not yet more upheaval. What we now need is evolution rather than revolution, especially when the revolution would be at enormous cost to the public purse and deliver nothing directly in improved rail services.

It has been argued that the public money going to Railtrack should generate an equity stake. However, the money that the Government will be paying Railtrack, in renewal grants for the west coast main line, for example, is to meet the cost of improvements to the network. An equity stake would have to be paid for on top of that money, and it is not clear what the taxpayer would get in return for the extra cost beyond a right to dividends.

Mrs. Dunwoody : Will the Minister tell us exactly what Railtrack has already received in moneys brought forward and under recent arrangements?

Mr. Hill : I think that my hon. Friend is alluding to the £1.5 billion in funding for Railtrack that was brought forward on 2 April. I hope to dwell further on that and the benefits that it will confer in terms of infrastructure renewal.

Let me continue by responding to the proposal made by the hon. Member for Carshalton and Wallington that Railtrack should be converted into a public not-for-profit stakeholder trust. There are serious drawbacks to that idea. The first is that the taxpayer would have to

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foot the bill for buying Railtrack. The second is that a public trust's spending would be public expenditure. The trust would have to fund all its investment from public resources--potentially trebling the public expenditure cost of enhancements. We believe that the money would be better invested in education and health, where there are no alternative sources of funding.

The Government believe that renationalisation or the purchase of a large and costly public equity stake in Railtrack is not necessary to ensure that the company meets its public service obligations. We need an appropriate framework of incentives and regulation, within a coherent strategy of public-private partnership for the railways and our transport system as a whole. The 10-year plan provides the broad framework. The Strategic Rail Authority assumed its full powers in February under the Transport Act 2000. Within the framework of the plan the authority has published its strategic agenda and will publish its strategic plan later this year.

We have appointed a tough rail regulator to ensure that Railtrack delivers on its licence requirements and does not abuse its monopoly position. His periodic review, published last year, greatly increased not just the rewards to Railtrack for good performance but the penalties for poor performance. The regulator is rigorously enforcing Railtrack's network licence obligations. He has proposed seven new licence conditions. They include the key requirement on Railtrack--strongly endorsed in the Committee's report--to establish and maintain an asset register and make it available to other key industry players. A further proposal covers the establishment of a code of practice for Railtrack's dependent customers--also a recommendation made by the Select Committee. Railtrack has also made a commitment to appoint a new public interest director to its board. This strengthening of the Railtrack board demonstrates the company's recognition of its special public role.

This has been a most useful debate on rail investment, the subject of the recent very thorough and well-researched report of the Environment, Transport and Regional Affairs Committee. The Government will give the report the careful consideration that it deserves and will respond in the usual way to its many important conclusions and recommendations.

Rail investment is an area of public policy of considerable complexity, but on the whole the picture is very encouraging. Passenger and freight use of the railway system has grown strongly. Passenger journeys are up 20 per cent. since 1997, and freight volumes have grown by 22 per cent. The 10-year plan for transport looks forward to further growth of 50 per cent. in passenger use and 80 per cent. in freight volumes. Huge investment is needed to accommodate that growth, to secure the improvements that we require in the safety and quality of rail services, and to make up for past under-investment.

Since 1997, rail investment has doubled. Nearly 2,000 stations have been improved and 17 new stations built. There are 50 new freight terminals, and more than 3,000 new vehicles have been introduced. The 10-year plan for transport set out the Government's view of the rail investment that will be needed to support our objectives

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for a rail renaissance. We also set out our view of the public funding that would be needed to support that investment and our intention to make that funding available. We estimated that £49 billion of investment would be required in total; £15 billion of public investment expenditure would lever in £34 billion of private investment. That is part of an overall plan for transport involving £180 billion of public spending and private investment.

Mr. Brake : The Minister will be aware that GoVia intends to increase services in south-west London by 30 per cent. It will achieve that by stopping direct services to Victoria or London Bridge. I am sure that it has similar proposals across the south of England. How will he ensure that the increased investment that he talks about will deliver the services that commuters want, as opposed to delivering what the rail companies want?

Mr. Hill : The hon. Gentleman is right. He and I share a common constituency concern about the efficacy of services to be delivered in due course by GoVia as a result of its acquisition of the Connex South Central franchise. It is precisely the role of the Strategic Rail Authority to supervise specific proposals that are being put in place. I have confidence that it will discharge that task. It is an open and accountable body, to which he and I, in our various capacities, can make representations.

In the brief time remaining, I want to speak about the human resources implications of the 10-year transport plan. I especially want to draw the Chamber's attention to the enormous employment implications of the Government's transport programme. The £180 billion plan is expected to create at least 60,000 new transport-related jobs, many of them in manufacturing and construction. The Government are determined to ensure that British companies can win that work by competing on expertise and price.

Recently, rail companies have had to import specialist welders and engineers from northern Europe, and signalling engineers from eastern Europe, to meet the demand for skilled labour. Shortages of train drivers are disrupting schedules in some areas. Action is now under way to recruit and train people to run the expanding rail system. The Department for Education and Employment, working with my Department, the SRA and other key stakeholders, has created a framework action plan to help push skills further up the agenda of the rail industry. The plan was unveiled by the DFEE last week. It is a balanced package that aims, among other things, to raise employer commitment to skills, to overcome obstacles to recruitment and labour supply, to improve training, and to improve skills and quality through externally validated qualifications. The plan focuses on several key occupations that the industry has identified as critical, including drivers, signalling and track maintenance engineers, middle management, graduates and professional staff.

For transport as a whole, the Department of the Environment, Transport and the Regions, the Department for Education and Employment, the Department of Trade and Industry and the devolved administrations, with Trades Union Congress involvement as appropriate, aim to meet in the near future to ensure that the 60,000 jobs created can be

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filled. We shall involve the new job transition service, to link available opportunities in transport to those affected by redundancies. I know that that will be welcome news to the Select Committee, which drew special attention to its concerns about skills shortages in the railway industry.

I am grateful for the support that has been warmly expressed today for the 10-year plan. April was the first month of its operation. With the progress that is now being made on refranchising, on the channel tunnel rail link and on the relationship with Railtrack, it was a good new beginning for the railways.

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