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Mr. Don Foster: The right hon. Gentleman and I may fundamentally disagree about the ideal future for son of Railtrack, but would he at least agree that he has just made a significant point, which is amplified by the bizarre situation? The administrators Ernst & Young, with all their consultants and advisers, are currently working up a number of alternative models while, at the same time, the Secretary of State is bringing in further advisers to come up with his own preferred model. That will then be put to Ernst & Young which, in turn, will have to put it to the Secretary of State who, at the end of the day, will make the decision and choose his preferred option. Why Ernst & Young is wasting all that time and spending all that money is frankly beyond me.

Mr. Redwood: Perhaps I can help the hon. Gentleman. The Secretary of State is in such a complex and difficult legal position that he has to allow work to continue on other options besides his favoured option. He has to be careful, if he thinks that he can make those decisions himself, not to be conflicted when he comes to make the ultimate judgment. It would be difficult for him if his company limited by guarantee were up and running and had put in a bid, but it was not quite the best bid on the table. If he were behaving honourably, as I am sure that he will, he would have to award the contract to the best bidder. However, if the two bids are dissimilar—if a direct comparison is difficult and it is arguable which is the best bid and which is not so good—he has to make sure that he has avoided any conflict during the process and has given a fair chance to the other bidders. It would be much better if one Minister were the advocate for the company limited by guarantee and someone else made the decision; otherwise the Government could well have even more expensive legal actions on their hands.

For reasons of natural justice, the Government need to be fair-minded, but they must also satisfy a series of legal problems. First, they must demonstrate to the administrators and, through them, the Railtrack shareholders, that the best possible deal has been done for the shareholders, who still have rights. As my hon. Friend the Member for Maidenhead always points out, many of them are railwaymen and many are pensioners living on their pension funds; they are not rich and would like to get something back from this awful mess.

The Secretary of State also has to satisfy European competition law. If it appears that he only ever had in mind one option, which then wins the competition, there could be difficult questions to answer in Brussels and the European Court about whether European competition law had been properly observed. A private sector company is in private sector administration, and has to be properly open for tender and bid. It is also a private sector company

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with a strong Government interest—the Government are the subsidiser of last resort—and has a strong monopoly position in a particular sector of the British transport market, which means that regulators and lawyers will take a strong interest in it.

We see from the document that an important part of the task of the chairman of the SRA in 2002 is to try to attract private capital for the railways. Hallelujah—that is exactly what is needed. Many Members have said that it is difficult to see how all the money in the modest plan will be drawn in. It is certainly difficult to see how there will be anything but delay in the really big sums needed in 2002 and 2003, given the uncertainties. The problem for the SRA and the Government are the contradictions. They say that 2002 is the year for delivery and the year to bring in private capital, but they are not making the decisions that they need to make today to maximise their chances of attracting that capital.

I put two simple points to the Government; if they seriously want lots of private capital, the first thing that they should do is get Railtrack out of administration and into workable ownership and management as quickly as possible. If reports are true—they may well be—and there is no chance of Railtrack being out of administration before this autumn, and possibly not until next year, we will have wasted more than a year. There can be no effective negotiations on private financing in conjunction with Railtrack because everyone will say, "We need to know who will own the company, what the rules are and what its balance sheet is before we can make an assessment."

The second thing that Ministers should do if they want private capital is settle the franchise position, which they undermined by granting short franchises or delaying franchise renewals. Instead of apologising for that mistake and agreeing proper franchise periods which could lead to those companies making a lot of new investment in new trains, which my constituents and others want, Ministers have compounded their error by saying through the SRA that they now wish to amalgamate franchises. The amalgamation of franchises is not a simple task. It means asset swaps, asset mergers, takeovers; all sorts of complicated corporate finance and legal activity; great complexities in bringing the franchises together under new and existing owners; and sorting out the resulting financial and asset complications, which would result in much more delay. By their decision, the Government have guaranteed a big gap in the order pattern for new trains in many parts of the country while we sort out who will run the franchises and when they will be up and running.

The chairman of the SRA says:

However, that does not seem to follow from all the other things that he said in his foreword. A few paragraphs earlier, he told us of a state of confusion; the Secretary of State has given him the impossible task of trying to stabilise an industry when the Government are making up policy as they go along. This is the man who is told that most of the money must be from the private sector, but we must not tell the Labour Back Benchers because they think that it will be a public sector operation.

My constituents and I want a big expansion in railway capacity. We want to be able to drive to the station, park in a decent car park with proper security, and find that

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there is a regular service to London and other important towns in the neighbourhood. We want four or five trains an hour to London, not two or three, as we have at present. I can promise Ministers that there is plenty of business out there if the companies are allowed to get on with it.

I have been asking endlessly for Ministers to give an assurance that a scheme that I have backed, and which is wanted by the local train operating company and the local council, and was wanted by Railtrack before it went into administration, for a new station and better waiting facilities and for work to begin on improving the track, would go ahead despite the administration. There is no such reassurance, and there can be no such reassurance, I fear, because although Ministers have heavy influence and are paying very big bills, they are not in control, nor is the SRA, and they are not driving forward the better railway that we want.

When the story comes to be written in a few years' time of the Secretary of State's decision to put Railtrack into administration, it will go down as one of the biggest bungles in the interface between politics and business over which any Minister has ever presided. We will discover during the next two years that it will have been massively more expensive to have that animal in administration than it would have been to do a deal with a private sector company. We will discover that the Government do really want to get it back into the private sector, because the Chancellor does not want all the money on his Budget for the massively expensive upgrades and improvements in the railway.

We will discover that while the Government and their lawyers, accountants and consultants are busily arguing with each other and trying to protect the Secretary of State against a minefield of legal actions, the travelling public have walked away, bought a load more new cars, and are sitting in traffic jams because they have no choice.

6.32 pm

Mr. Kelvin Hopkins (Luton, North): I have very little time, so I shall make just a few key points. I regret that the Liberal Democrats have chosen to throw barbs at my right hon. Friend the Secretary of State, instead of the brickbats that are due to the Conservatives, who caused all the problems. My right hon. Friend is doing a tremendous job in extremely difficult circumstances. He has my strong support and that of my hon. Friends. I look forward to his success in future years.

The right hon. Member for North-West Hampshire (Sir George. Young), in his own elegant way, put a wonderful gloss on a national transport disaster perpetrated by his Government. We are trying to pick up the pieces—rather belatedly, I think. We should have taken action in the first week of May 1997. We have taken action only now, but we are at least beginning the process, which will be long and difficult.

My right hon. Friend has taken the first necessary step, but he must go a lot further. He should look at the state-owned, integrated national railway systems on the continent, which are light years ahead of our railway system. They are integrated and publicly owned and rely on public investment. We must review the way in which we invest not only in the railways but in other parts of the public sector and question the Treasury rules on borrowing. Many other countries in the European Union park such investment off their public sector borrowing

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requirement so that they can get inside the borrowing limits of economic and monetary union and the stability and growth pact. They are right to do that and we should follow their example. If they can get away with it, so can we. We could solve many problems in the public sector if we did that.

There are two fundamental problems arising from privatisation—fragmentation, about which we have heard much, and the fact that it is finance driven, not public service driven. I take issue with the right hon. Member for North–West Hampshire, who compared railways with airlines. If airlines have a route that is failing, they take it off. There is no problem. However, we cannot take off the Circle line. It is part of the fundamental infrastructure that is necessary for the functioning of our country, not to mention its capital city. There is a difference between the vital infrastructure of the railway network and airlines, which can change.

We heard reference to Railtrack being the problem, whereas the train operating companies seem to be blameless. According to the strategic plan published this week, the total delays caused by train operators were 43 per cent., and the total delays caused by Railtrack were 42 per cent. so they are equally to blame. We heard today that the train operating companies have serious financial problems. We must look to reintegrate the train operating companies, the track and the engineering work into one integrated railway industry—we must get back to what we had before.

The problem with British Rail was not that it did not work, but that it was starved of finance. If we had invested in British Rail in the way that the continentals have invested in their railways, we might be where they are now. I recently visited SNCF in France and saw developments that we will not see in this country for a decade, even with the best will. I spoke to an SNCF engineer and asked where the finance came from. He said, "In France, when we speak of PPP, we mean public, public, public." I urge my right hon. Friend to consider the possibility of going back to a properly integrated state-owned railway system.

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