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Mr. Michael Weir (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.

Mr. Foster: 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.

Mr. Byers: 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.

Mr. Foster: I am grateful to the Secretary of State for making that point, but we shall return in a minute to the

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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.

Dr. John Pugh (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?

Mr. Foster: 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.

Mr. Geoffrey Clifton-Brown (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?

Mr. Foster: If the hon. Gentleman will be patient, I will come to that. I was critical of his party for failing to

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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.

Mr. Andrew Mitchell (Sutton Coldfield): Will the hon. Gentleman give way?

Mr. Foster: 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:

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

and concluded:

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 the hon. Member for Cotswold (Mr. Clifton–Brown) mentioned, my right hon. Friend the Member for Ross, Skye and Inverness, West (Mr. Kennedy) had raised the proposals at Prime Minister's questions, and received from the Prime Minister the bizarre answer:

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:

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:

relate to running

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:

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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.

Mr. Redwood: 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?

Mr. Foster: 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.

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