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

Examination of Witness (Questions 860 - 879)



  860. What dates were these meetings?
  (Mr Byers) Off-hand I cannot remember. I am more than happy to write to the Committee with the detail.

  861. Do you have in your possession or did you receive a letter from Sir Alastair Morton to the Department on 1 October addressed to the Permanent Secretary?
  (Mr Byers) I would need to refresh my memory.

  Miss McIntosh: Could I help you there. In the letter Sir Alastair Morton writes that a decision should have been reached on 1 October and I quote from his letter. "We have now arrived at 1st October, when all should have been implemented" (ie implemented in relation to the Renewco agreement.) He concludes by saying: "The SRA has played its part fully competently in this story"—I quote again—"Personally I regard the episode as confirming my views that the SRA needs to have satisfactory delegated authority rather than be placed under the direct, point-by-point control of your Department ..."

  Chairman: I have to say we do not normally have access to the Permanent Secretary's correspondence. Do you, Secretary of State?

  Miss McIntosh: If would be enlightening if the Secretary of State could let us know if the account at the time of that letter is accurate or not.


  862. If the letter is made available to the Secretary of State, I am sure he could elaborate.
  (Mr Byers) It would be nice to see it at some stage. I think there Sir Alastair is expressing a view that he has expressed on many occasions, that he believes the Department is involved in point-by-point scrutiny of everything the Strategic Rail Authority does. That is a view that Sir Alastair has expressed over a period now and the Committee will be aware of that and it is something he feels strongly about. It is one of reasons why I have tried to introduce new Directions and Guidance which make it absolutely clear the roles of the Department and Strategic Rail Authority. I hope that when we have the new Chairman in place there will be a very positive and constructive relationship because through those Directions and Guidance people will know exactly what role they are expected to play. As I said in my opening remarks, it is not part of what I want to do to be involved in the micro-management of the Strategic Rail Authority. They are a strategic rail authority, they are going to be arm's length away from me as Secretary of State. I want them to come up with a Strategic Plan which I hope you will agree with in the Select Committee and I will agree with as Secretary of State, and then get on with it because the thing that has bedeviled this industry for far too long is people once again, and I have to say from what you read from the letter this may be an example of it, trying to blame someone else, when in reality what we need to do is try to work together.

Miss McIntosh

  863. Secretary of State, your Department asked for an agreement on Renewco to be made on 1 October. Did your Department simply fail to act or to positively intervene to stop from happening something that was important to the future of the Railtrack?
  (Mr Byers) I think you will be aware that the agreement on April 2 was for all parties to use their best endeavours as far as Renewco was concerned, and the conditions that were attached to that, the main one that I am aware of is that Renewco should not score as a public sector body. That condition had not been met by 1 October and therefore the money could not be paid over. If I can just remind the Committee of this—and I can understand why the 162 is of some concern, it is a large sum of money—on October 1 we did pay over £337 million to Railtrack because that was part of the legally-binding agreement entered into on April 2. The £162 million was using best endeavours and I do believe that was the case. What I would go on to say is that if one looks at the £162 million compared to the financial meltdown that was being faced by Railtrack, I do believe it is a bit of red herring because they would have been £700 million in deficit by 8 December of this year.

  864. Do you believe in the role for an independent economic regulator for any industry?
  (Mr Byers) I have said, and I have said it to the House on more than one occasion, I do believe with railways and with other areas why as well, where it is appropriate, there should be independent economic regulation.

  865. I do not know if you have with you today the evidence that we took from Mr Winsor but may I draw your attention, Secretary of State, to the rather powerful remarks that he made. he only person that could have approved an interim review was the Rail Regulator. You effectively neutralised his power to apply for such a review because you told him—and I quote—"Mr Byers said that they had thought of that [ie Railtrack] and that if such an application were made, he [Mr Byers] 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 [this is Tom Winsor] whether I had really heard what I had just heard, I asked whether that would be to over-rule me in an interim review or in relation to all my functions. Mr Byers said it was cover everything but that its first use would be in relation to an interim review which the Government did not want to proceed" This has enormous implications not just for the rail industry but for the Bank of England, all energy, telecommunications, transport centres, the Offcom Bill and the Health Bill. Where do you stand on the role of an independent regulator and when will you give further directions to neutralise his power to intervene in the future?
  (Mr Byers) The Secretary of State has no power to do that. What the Secretary of State is able to do is to introduce a measure before this House. The House of Commons would need to agree to it, as would the other place. It is Parliament that decides the role of the regulator. The important point to stress to the Committee is that the rail regulator—and given the character of the rail regulator this is no surprise—did not feel his independence was curtailed at all, as I think he said to the Committee. It would have been if Parliament had agreed but Mr Winsor, on the evening of Saturday 6 October, said in very clear terms to Railtrack that if they made an application to him for an interim review it would be considered and it would be possible for him to immediately and publicly announce that he had begun such a review.

  866. You went on in evidence yesterday to the House to express surprise that Railtrack did not oppose the petition before the court on the Sunday. The only ground Railtrack would have had at that stage to oppose such a petition would have been a successful application for an interim review. I am not going to use the word "threaten" but I quote: "The Secretary of State said to me" - Tom Winsor - "that if there were an application for an interim review he, the Secretary of State, had the necessary authority to introduce immediate legislation to prevent a review taking place. I explained that such legislation would be a card which the government should be extremely reluctant to play." The point is that you placed the independent rail regulator in an impossible position because if he had turned to you on that Friday afternoon and said that yes, he was going to support a possible application that we know for a fact came on the very next day, the Saturday, you had already prepared emergency legislation which you were prepared to put before Parliament to block him. I put it to you, Secretary of State, that you had taken away any possible application for an interim review because you had prepared to put before the House on Monday emergency legislation to block it. We are under no illusion on this side of the House that your majority would have worked in your favour and you would have blocked it.
  (Mr Byers) For accuracy in the Committee, it must be made clear that the question you have just put is factually inaccurate. No application was made to the regulator. The regulator was crystal clear in the Committee last week that he said to Railtrack on the evening of the 6th in a conference call that if they could apply to him it would be considered. With respect - and the record will show this - you said that an application had been made to the regulator and I think it is important that we get on the record that no such application was made. Indeed, the regulator in his evidence before the Committee was absolutely clear that he said to Railtrack on the evening of Saturday 6 October that, if an application was made to him for an interim review, it would be considered and it would be possible for him to say publicly that he had begun such a review. No such application was made by Railtrack. Those are the facts of the case as reported to the Committee by Mr Winsor last week.

  867. To keep to the facts, Mr Winsor had been told that you had emergency legislation to block such a review. What purpose would it have served for Railtrack to then come forward with such an interim review, when you had petitioned to the court that Sunday and the emergency legislation was going to be presented to the House on Monday, when you were going to block the interim review and undermine the independence of the rail regulator by doing so?
  (Mr Byers) There are two very important points to make here. First of all, it would have been a factor that the High Court judge could have taken into account that Sunday afternoon because the regulator, as he indicated on the evening of Saturday the 6th, would have said publicly, immediately, that he had begun a review, clearly a material factor that the High Court judge would have taken into account when considering my petition on the Sunday afternoon. The second important point is it is not for me as the Secretary of State to introduce legislation just when I want to. It has to go through this House; it has to go through another place. It is for Parliament to decide the role and the responsibility of a regulator. That is quite right and proper. Tom Winsor is clearly still totally independent, demonstrating that in his conversation with Railtrack on the evening of 6 October. His powers are not curtailed in any way.

  868. You do not deny that you had the legislation ready? I would like to know precisely what date that legislation was prepared.
  (Mr Byers) As part of the contingency planning, legislation was drafted.

  869. At what date? It is a very simple question. At what date was the legislation prepared?
  (Mr Byers) It was drafted so that, if need be, if I took the decision on 5 October, it could be introduced at an appropriate time in Parliament. However, I know this has been presented like some great secret that we were keeping hidden from people but can I say for the record to the Committee that the fact that I had power to introduce a bill at the earliest opportunity giving me the power to direct the rail regulator was in my evidence to the High Court on 7 October. It was placed in this House on 23 October in the library. We drew it to the attention of the Shadow Transport Minister on 2 November and indeed Mr Steve Marshall, when he gave his evidence before this Committee on 31 October, referred to it as well. We have been absolutely clear about the position that had been adopted by the government; no secrets; totally open and honest about our intentions. The reason why is because it is a natural consequence from our decision that no additional, extra public money would go to Railtrack.

  870. Was the legislation prepared in August, September or October?
  (Mr Byers) It was prepared on a contingency basis so that, when I took the decision on 5 October, we could introduce it if I felt it necessary to do so.

  871. Against the background of the evidence we have heard over the course of this inquiry, what assurance can you give track operators as well as prospective investors that there will be adequate funding for any new vehicle that replaces Railtrack, free from interference from the Secretary of State?
  (Mr Byers) We will ensure that appropriate funding is made available. I think I said earlier in my evidence to the select committee that we would want to ensure that funding was at a level which has been made available to Railtrack. We are putting in place some very positive measures to support financially the company limited by guarantee and I do believe that, with the money that we are now putting in, we have an opportunity of receiving real benefits as far as the travelling public is concerned. I do believe, as I think I said to the House when I made my statement on 15 October, that whatever structure we come up with after administration there will be a need for independent, economic regulation.

Mr Brian H Donohoe

  872. Had you not taken the action that you took on 5 October, what would have been the consequences to the workers of Railtrack the following week?
  (Mr Byers) The reason why contingency plans had to be put in place was that on 5 October I had to take a decision whether to in principle put more, extra, public money into Railtrack or whether to simply say enough is enough. Saying enough is enough, I then have to inform the chairman of Railtrack which happened that Friday afternoon. We had to ensure that if the High Court agreed to my petition for administration we would have a railway system operating properly on the Monday morning. Because of the contingency arrangements that we had in place, we were able to do that. Indeed, the railway system has run since, even though in administration and I should take this opportunity of complimenting all of those workers in the railway industry who even in difficult circumstances have continued to turn up to work and do a good job for all of us.

  873. Had you not taken the decision that you took on that date, would it not have been the case that the following week Railtrack, the administrator or whoever, the receiver, would have been issuing redundancy notices?
  (Mr Byers) I honestly do not know the answer to that and what the consequences would have been. I do know that what I was trying to achieve by having the contingency arrangements in place was that we could still operate a railway system and it would not descend into chaos.

  874. Had you not taken that decision, Secretary of State , there was a very real threat, was there not, that it was possible that the whole of the infrastructure, in terms of the employment of the individuals, would have collapsed? You would not have had at that stage a railway running in this country.
  (Mr Byers) There would have been very real dangers that we would have faced difficulties along those sorts of lines but I would not want to speculate as to precisely what the consequences would have been. I just felt that we had to ensure that we had contingency arrangements in place so that the railway could continue to operate smoothly and that those people turning up for work on that Monday morning would know that the administrator could give them certain assurances about their future employment. I think we all know from our own experiences in our own constituencies—I certainly do from my constituency on Tyneside—that when someone hears that an administrator has gone in the immediate reaction is you are going to get your P45 the next week. I am pleased to say that, with the administrator in at Railtrack, that simply has not happened.

  875. If I can turn to this meeting that took place on 25 July between yourself and the chairman, have you seen the notes of Mr Robinson?
  (Mr Byers) No, I have not.

  876. Did you take notes of that meeting?
  (Mr Byers) There would have been a note taken in the Department, which is standard practice.

  877. These notes have not been made available to, say, the Financial Services Agency. Your notes have not been made available.
  (Mr Byers) We will certainly cooperate with the Financial Services Authority in any preliminary inquiry they are conducting.

  878. Do you think it is significant that the notes of the chairman seem to differ from your understanding of that meeting? Do your notes contradict the notes that the Financial Services Agency received from Mr Robinson?
  (Mr Byers) I am in a slightly difficult position because I have not seen Mr Robinson's notes but I do know that the account I have given to the House of Commons is in line with the record that we kept of that meeting.

Andrew Bennett

  879. Could we see those notes?
  (Mr Byers) I want to be helpful to the Committee. We will cooperate with the Financial Services Authority and the Committee will decide.

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