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Chris Grayling (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?

Mrs. May: 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

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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

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

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

On 5 November, in response to my hon. Friend the Member for Surrey Heath (Mr. Hawkins), he said:

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.

Geraint Davies (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?

Mrs. May: 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?

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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—

Mr. Brian H. Donohoe (Cunninghame, South): Will the hon. Lady give way?

Mrs. May: No.

Hon. Members: Give way!

Mr. Speaker: Order. The hon. Lady is not giving way.

Mrs. May: 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:

adding that, "we have no information" regarding the company's ability

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.

Mrs. Gwyneth Dunwoody (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?

Mrs. May: 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.

Mr. Gerald Howarth (Aldershot): Has my hon. Friend noticed that in the summer the accounts of Railtrack were

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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?

Mrs. May: 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.

Mr. Martin Salter (Reading, West): Will the hon. Lady give way?

Mrs. May: 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.]

Mr. Speaker: Order. Let the hon. Lady speak.

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

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—

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