Examination of Witness (Questions 760
WEDNESDAY 7 NOVEMBER 2001
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.
761. I should like to get to the legislative
(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
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 Governmentor
indeed any other possible provider of free financein 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 dutyand
indeed no inclinationto give, through the periodic review
and interim review mechanisms, taxpayers' money to the company
for being inefficient or incompetent. It may bethe company
must speak for itselfthat 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?
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
(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 concernI think that is a fair descriptionthat
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
772. Would it be safe for us to assume that
that was the review the Secretary of State was talking about?
(Mr Winsor) Yes.
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.
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
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.
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
778. Are you saying that when he said that no
threat was issued at that meeting that that was not an accurate
(Mr Winsor) He might have not regarded the statement
in question as a threat. I am just telling you what he said.
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
(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,
passedand I do not think we should assume that a Bill introduced
is the same as a statute enactedthen clearly my independence
would not only be compromised it would be extinguished.