Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witness (Questions 760 - 779)




  760. When they spoke to you later on Saturday night did you ask them why they had not come back to you?
  (Mr Winsor) I do not recall doing that.

Miss McIntosh

  761. I should like to get to the legislative point.
  (Mr Winsor) I am sorry. I said that Mr Robinson's reaction to Mr Byers' decision was likely to be an immediate application to me for an early interim review to restore Railtrack's financial position if that were feasible. Mr Byers said that they had thought of that and that if such an application were made, he had the necessary authority immediately to introduce emergency legislation to entitle the Secretary of State to give instructions to the Regulator. After pausing to consider whether I had really heard what I had just heard, I asked whether that would be to overrule me in an interim review or in relation to all my functions. Mr Byers said that it would cover everything but that its first use would be in relation to an interim review which the Government did not want to proceed.

  762. Why in those circumstances did you not tender your resignation, since your whole independence had been blown out of the water?
  (Mr Winsor) I do not think it had been. My independence has not been blown out of the water. My independence can only be taken away by Parliament and Parliament has not done that.

  763. Parliament was not given the opportunity even to consider the legislation which would have been required.
  (Mr Winsor) And Parliament has yet to be given that opportunity, and until Parliament legislates my independence away it remains.

  764. It would appear, and you have already alluded to this, that the company had indicated that post-Hatfield they were going to need a substantial increase in funds, that you had used terms publicly such as "Railtrack were rattling around with a begging bowl" and in those circumstances Railtrack had no-one else to turn to but the Government.
  (Mr Winsor) I disagree. I used the phrase "hawking themselves unwanted around Whitehall with a begging bowl which they should put away". The implication of that is that they had plenty of money to keep going and the pleas of poverty of the company were unfounded and that they should invoke the necessary regulatory mechanisms at the proper time when there was a proper case to be made. In other words, they should use the existing regulatory mechanisms rather than going to the Government—or indeed any other possible provider of free finance—in the meantime. That is what I meant by that and I believe that is what the company understood by that. But the company did go to the Government. I do not know why the company went to the Government and not to the Regulator, why the company only disclosed its financial position as it saw it to the Government and not to the Regulator, unless they believed this. I have made it pretty clear to the company that I have a statutory duty not to make it unduly difficult for the company to finance its relevant activities. The key word there is "unduly"; not to make it unduly difficult. I have no obligation not to allow it to be duly difficult. The way that is properly interpreted is that I have no duty—and indeed no inclination—to give, through the periodic review and interim review mechanisms, taxpayers' money to the company for being inefficient or incompetent. It may be—the company must speak for itself—that the company had concluded that if the Regulator will not give them money for being inefficient or incompetent then the Government might. I think that was an extraordinary judgement for the company to make, and I do not know that the company did make that judgement.

  765. I am sure you would not wish to put words into the company's mouth. The evidence we have had from two quarters, from the Secretary of State and from the company, was that they were entirely solvent until the Government failed to pay that sum of £445 million on the due date of 1 October. Could you just help the Committee by telling us how your conversation with the Secretary of State in those most bizarre circumstances ended on that Friday afternoon?
  (Mr Winsor) Yes, I shall go back to it and then if you want to deal with the question of insolvency and whether they were insolvent, because I have seen Mr Marshall's evidence and he said that on 5 October they were not insolvent until a quarter to five that afternoon.

  The Secretary of State said to me that if there were an application for an interim review he had the necessary authority to introduce immediate legislation to prevent the review taking place. I explained that such legislation would be a card which the Government should be extremely reluctant to play. I explained why. I pointed out the very severe adverse effects it could and probably would have on the financial markets and investor confidence generally if the Government were to be seen to be taking away the independence of an economic regulator. I said that the effect on transport stocks would be severe, but it would go much wider than that. It would have very serious adverse implications for the constitutional position of independent regulators in other industries, including but not limited to gas, water, electricity and telecommunications, the independent position of the PPP arbiter in the London Underground. (How can an arbitrator in a dispute have to decide the case in favour of one party to the dispute at the direction of that party?) I said it would have severe adverse implications for the market perception of the stability of the regulated privatised industries, investor confidence in those companies and the effect on other companies in the transport and utilities sectors. I said it was inconsistent with the Chancellor's public position in June this year in relation to the importance of the independence of the competition authorities, of which I am one, and the forthcoming Enterprise Bill, and also the independence of the Bank of England. I said that it may well constitute or precipitate defaults under the loan arrangements for Virgin's acquisition of the two new fleets of tilting trains for the West Coast and Cross Country networks, so the Department could say goodbye to the large premium payments which are due from Virgin in the latter years of those two franchises. I added that taking me under political control would go entirely against the grain of the major theme of the Government's policy position in the General Election campaign, which was about getting private sector capital into the provision of public services. I told them that such a step would do considerable harm to the ability of the Government to get companies to put money into public projects. I also mentioned the implications of the Human Rights Act 1998 because of the right of the citizen to have his civil rights determined by an impartial tribunal. For all those reasons, and others I can think of now, I said, "Would the Government really be prepared to take all those risks in order to prevent an interim review?". Mr Byers said simply that if I were to proceed with an interim review that is what the Government was prepared to do. He explained that the application to put the company into railway administration would be made on Sunday and the meeting ended at that point.

  Miss McIntosh: Where do we go from here?

Mr Stevenson

  766. The last 15 minutes or so have been extremely interesting and informative but may I clarify a point? Do I understand the position as you have outlined it over the last few minutes to be as follows? In January 2001 you intimated to Railtrack that if an application for an interim review were to be received you would consider it.
  (Mr Winsor) Yes.

  767. Yes. You heard nothing at all from Railtrack and as we sit in this room today you still have had no such application from Railtrack.
  (Mr Winsor) I would not say I have heard nothing from them, but I have had no such application.

  768. Let me rephrase that. You have had no application for an interim review from the end of January 2001 to now, as we sit in this room today.
  (Mr Winsor) Correct.

  769. Within that process you have clearly expressed your profound concern—I think that is a fair description—that for reasons best known to themselves, Railtrack saw fit to make direct approaches to Government, presumably for direct grant, rather than using the auspices of your office or the offer you made at the end of January 2001?
  (Mr Winsor) That is correct. They went to the Government instead of me.

  770. Do I understand correctly that the interim review which was the subject of the conversation you have just referred to in your contemporaneous notes was a review which Railtrack wanted you, having ignored your Office in terms of this review for nine months, to instigate on Saturday 5 October and complete by Monday 7 October?
  (Mr Winsor) No, they gave me shorter time; they gave me until Sunday night.

  771. Let me rephrase my question so that we are clear. It was a review for which, having ignored your offer from January 2001 for eight or nine months, they then came along on Saturday 5 October to ask you verbally to please instigate. You said you would consider it if you received one. You asked when they wanted it and how much they wanted? Hundreds of millions of pounds were indicated to you by the Chairman of the company and they wanted it completed by Sunday 6 October. Is that correct?
  (Mr Winsor) Yes. Your dates are a little wrong, but yes, Saturday night they said, "If we made an application for an interim review, could you do it by Sunday?". After asking some questions and getting unsatisfactory answers, I said no.

  772. Would it be safe for us to assume that that was the review the Secretary of State was talking about?
  (Mr Winsor) Yes.

Chris Grayling

  773. You have described in some detail to us the meeting which took place on that Friday afternoon. On Monday of this week in the House of Commons chamber in response to a question about that meeting as to whether at that meeting the Secretary of State had threatened to introduce such legislation if you chose to go ahead with an interim review, the Secretary of State said that no threat was issued. Was that statement accurate?
  (Mr Winsor) The Secretary of State said that if an application were made to me for an interim review he had the necessary authority to introduce immediate legislation to give me directions so as to stop the review.

  Chris Grayling: But was the statement to the House of Commons, that no threat was issued in that meeting, accurate?


  774. You did not feel threatened. He was telling you what his powers were.
  (Mr Winsor) The Secretary of State said that he would get the authority of Parliament to prevent the review proceeding.

Chris Grayling

  775. I am asking the question specifically about the statement on Monday. Was that statement accurate?
  (Mr Winsor) I do not have the Official Report handy to me.

  776. I should be surprised if you have not read what he said before this meeting. He said that no threat was issued. Was that statement accurate?
  (Mr Winsor) He said that if I did an interim review he would introduce immediate legislation.

  Miss McIntosh: He said that to you. The point is that he did not tell Parliament.

Chris Grayling

  777. Was the comment made to Parliament on Monday accurate, yes or no? It is a simple question.
  (Mr Winsor) You are asking me whether he said that he would introduce emergency legislation to stop the interim review and that answer is that he did say that he had the necessary authority to introduce that legislation and he indicated that he would use it.

  778. Are you saying that when he said that no threat was issued at that meeting that that was not an accurate statement?
  (Mr Winsor) He might have not regarded the statement in question as a threat. I am just telling you what he said.

Mr Stevenson

  779. When the Secretary of State indicated to you that he was prepared and had the necessary powers to use legislation to block an interim review, did you feel your position was undermined, compromised, did you feel your independence was compromised and, I repeat the question Miss McIntosh asked you, why did you not resign?
  (Mr Winsor) Was my independence compromised? There was clearly a certainty that if the Secretary of State's proposed legislation were introduced and, after parliamentary scrutiny, passed—and I do not think we should assume that a Bill introduced is the same as a statute enacted—then clearly my independence would not only be compromised it would be extinguished.

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