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Lord Clinton-Davis: My Lords, perhaps the Minister will give way. Is he seriously claiming that British shipping is a success? Is he aware that even in the past few weeks British shipping has shown a further decline, whereas French, Dutch and Danish shipping have been re-attracted to their flags?

Viscount Goschen: My Lords, the noble Lord, Lord Clinton-Davis, makes much of good contacts with industry. I can only suggest to him that he talks to some of the extremely successful British companies that are involved in shipping. I suggest that he talks to the Chamber of Shipping, which is the representative of the industry; I suggest that he talks to P&O, which has had some success--as the noble Lord may recognise--in the cruising, ferry and container industries. There are many

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success stories and we would be wise to say where we are strong in the industry rather than endlessly concentrating on some of the difficulties that the industry has had to go through in the post-war years.

On the subject of buses, we heard a lot about the effects of deregulation and privatisation under the Transport Act 1985. That has been a success. Today 93 per cent. of all bus services in the UK are provided by privately-owned bus companies; 84 per cent. of all bus services in the UK are run commercially without subsidy. Bus operators are free to provide services wherever they wish on a commercial basis and local authorities have powers to subsidise necessary services after competitive tender. That has resulted in more bus mileage--up some 29 per cent. since deregulation--more flexible services, more operators and substantial investment in new vehicles, including minibuses and midibuses. Bus operator costs per vehicle mile have come down by more than a third in real terms and local authority public transport revenue support has more than halved in real terms.

Understandably, a number of noble Lords have concentrated on the issue of railway privatisation. It is a very large undertaking indeed. It is the major structural reform which the railway industry in this country so desperately needed. Most commentators would now recognise that the old railway was a monolithic, monopolistic nationalised industry which never had the opportunity or, I believe, the incentive to focus on the needs of its customers. The railway's basic problem was structural and not financial. We have now addressed these structural difficulties through the passing of the Railways Act and we are beginning to see the benefits of this strategy coming through to passengers. I listened with care to the comments we have heard from many noble Lords that the benefits that have flowed into the airline industry and into many other industries where the private sector has become involved will flow, and are already flowing, into the railway industry.

For the first time, key services are contractually safeguarded in franchise agreements. All seven of the franchises awarded so far will maintain the same levels of service as were previously operated by BR. In a number of cases, franchisees will be adding new services to the timetable.

The noble Lord, Lord Berkeley, commented on networker benefits such as through ticketing. I strongly believe that these benefits are a key to the success of the railway industry in the future. The companies that are operating the services know that it is in their commercial interest to pursue commercial deals with each other, to offer attractive new pricing strategies, to work out innovative fare deals and so forth. Those are what companies do if they want to encourage--it is in their strong interest to do so--as many people on to the railways as possible. Part of that involves working with one's competitors.

Baroness Thomas of Walliswood: My Lords, is the noble Viscount aware of the doubts that some people have about this matter? In Surrey one still cannot buy a ticket which allows one to go one way by one bus

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company and come back with another bus company--and not for lack of trying. I really do think that quite a lot of passengers have a good deal of scepticism about the Government's ability to introduce sensible networking. What can the noble Viscount say to allay some of that scepticism?

Viscount Goschen: My Lords, I am very sad that for second time this evening the noble Baroness has put Dorking in Surrey into somewhere outside the modern world in terms of the developments we are seeing in transport.

It is clear that companies must do and will do everything they can to encourage people on to their services. That involves innovative park-and-ride schemes and looking at what are the basic elements that attract people on to their services. The key to doing that is to build those into their agreement. One comparison would be with package holidays, which are sold with various elements of transport, accommodation and so on included. People buy those because they can see that they are convenient and an economical way of going about buying holidays. We firmly believe that that will continue to flow in the railway system and within other areas of transport such as the bus network, which the noble Baroness highlighted. Network benefits like through ticketing and discount cards for elderly and disabled people are contractually safeguarded--for the first time, one might add.

The franchising director has already announced that, for the first time ever, key fares will be price capped. They will be held constant in line with inflation for three years, and then progressively reduced in real terms for the next four years.

This better, cheaper railway will benefit the taxpayer as much as the travelling public. In seven years' time, the seven franchises awarded so far will require less than a third of the grant paid to British Rail in 1995-96. I would say that that is an extraordinary statistic and it is one which bears careful consideration.

Rail privatisation is now a reality. More than 65 per cent. of the rail industry--worth more than £6.7 billion by aggregate turnover--has now been transferred to the private sector. Only on 20th May, dealing in Railtrack shares began. The successful flotation of Railtrack marked a major milestone in the transfer of Britain's railways to the private sector.

But that is by no means all. The three rolling stock leasing companies have been sold and more than 90 per cent. of the UK rail freight is now owned by the private sector. Twelve of the 13 infrastructure maintenance units and track renewals companies have also been disposed of, along with a large number of other former BR businesses, including BR telecommunications. I could go on about the other businesses--and a very large number of them there are--that have been transferred into the private sector, but a key development was the successful flotation of Railtrack.

In terms of investment, concerns have sometimes been expressed that investment under the privatised railways would not be given priority. Railtrack has already shown that this concern is misplaced. But the

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privatised Railtrack will receive income from franchise train operating companies through access charges and will have access to wider sources of private finance to fund infrastructure schemes. Railtrack has said that it intends to spend some £8 billion on the network over the next five years. It also expects to contribute to the project cost of Thameslink 2000 an estimated £600 million--an excellent example of a major investment project which will enhance the rail network, opening up new opportunities for through services north and south of the river. We have also heard about investment in rolling stock.

These are the hard facts of railway privatisation so far. The private sector is introducing tougher passenger's charter standards, with more generous compensation arrangements for its customers. It is improving the quality of waiting accommodation at stations and investing in measures to boost passenger security.

One could go on about the progress that has been made on rail privatisation, the commitments that have been made and the improvements that we are seeing. But I think it might be appropriate to move on to the private finance initiative, a subject on which a number of noble Lords have commented. Indeed, it was the central thrust of a number of contributions.

As I remarked at the outset, outright privatisation is by no means the only way of involving the private sector. The PFI represents a transformation in the way the public sector procures services and assets. In summary, the Government decide what services they need. The private sector is then challenged to come up with a bid which offers imaginative ideas and solutions to designing, building, financing and operating that scheme. Transport is a key within the PFI. Of the £4.8 billion of PFI deals agreed across the Government in the past financial year, the transport sector accounted for some £3.8 billion, which is some 80 per cent. PFI deals have been agreed across almost all areas of the Department of Transport. Only last week, His Royal Highness the Prince of Wales opened the second Severn Bridge. This magnificent project was completed on time and within budget and financed entirely by the private sector at an estimated cost of £300 million. One could go on.

The noble Lord, Lord Berkeley, raised the question of financial commitments under private finance deals and, as a read across, rail franchising as well. I can assure the House that such commitments are a matter of contract and therefore are legally enforceable. The Government stand firmly behind those financial commitments and will ensure that they are honoured.

Another issue that has been raised in connection with PFI is the question of transparency. I believe that it was the noble Lord, Lord Clinton-Davis, who wanted to see more openness. I am sure that the noble Lord recognises that some areas have to be kept commercially confidential. It is the Government's policy to be as open as possible and to release as much information as possible, although we must not prejudice future deals and we must have the interests of the taxpayer very much in mind. However, given those constraints, we want to be as open as possible.

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Another issue raised by the noble Lord, Lord Clinton-Davis, was the difficulty perceived by some companies in bidding, the length of time that it takes and the costs involved. I accept that bidding for PFI is inherently different from conventional procurement. The private sector is not bidding simply to carry out the design and construction of the project; it is undertaking to maintain and operate services over a longer period. I suggest that such a sea-change in the thinking behind the bidding procedure must be allowed to settle in. We are still in very early days. We are listening to what potential contractors and partners are saying and are very much taking their comments on board. We are alive to the issues that have been raised and continually bear in mind our approach to PFI in determining how future projects should be taken forward.

Some of the major PFI projects relate to DBFO roads and to the Channel Tunnel rail link. As we have heard, the Bill is currently before a Select Committee of your Lordships' House. As we had a very full discussion of the issue some two weeks or so ago, I shall turn instead to the issue of DBFO roads. The noble Earl, Lord Mar and Kellie, and my noble friend Lord Selsdon were interested in that new type of road provision. The new approach is at the forefront of the Government's PFI. It is a prime example of the Government working in partnership with industry to provide value for money for the taxpayer. The programme's capital construction value is estimated at over £1 billion and is expected to deliver 13 projects covering up to 43 schemes, harnessing private finance to fund both initial construction and long-term maintenance of DBFO roads over 30 years. I was intrigued to hear my noble friend Lord Selsdon recount the history of the various acronyms leading to DBFO and the other approaches that have been taken.

The fundamental PFI requirement, apart from value for money, is that the private sector genuinely assumes risk. It is our objective to allocate risk to whoever is best placed to manage it. The Government firmly believe that design and construction risks, and the balance between the quality of construction and future expenditure on maintenance and upkeep, can usually be best handled by the private sector. We bear that very much in mind.

Other PFI schemes are in the pipeline. For example, the preferred bidder for Croydon Tramlink was recently announced and it is hoped that this contract will be signed in the near future. London Transport has announced potential PFI deals in the field of revenue collection, power supply and communications. The Civil Aviation Authority is continuing to progress PFI deals for the New Scottish Air Traffic Control Centre and the Oceanic Flight Data Processing Centre. All told, we already expect to see at least a further £2 billion of transport deals agreed over the next three years.

In conclusion, we have heard about a variety of transport modes and about how the private sector has been involved. It is clear from all those who have contributed, including the Benches opposite, that it is now widely recognised and irrefutable that the private sector has a major role to play in transport provision in this country. There has been a revolution in the way in

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which we look at these things. I believe that my noble friend Lord Cromer was right to draw attention to the change not only in financing and not only in designing, building and operating services, but in our culture and in the fact that the passenger must now be at the front of everyone's thoughts. I again thank my noble friend Lord Astor of Hever for tabling the Motion, and all those noble Lords who have contributed to the debate.

8.54 p.m.

Lord Astor of Hever: My Lords, this has been an interesting and wide-ranging debate. Despite what the noble Lord, Lord Clinton-Davis, said, I am delighted that so many noble Lords agree that privatisation has delivered real improvements in a wide range of transport industries. I thank all noble Lords who have contributed many important points at this late hour and my noble friend the Minister for his robust reply. I beg leave to withdraw my Motion for Papers.

Motion for Papers, by leave, withdrawn.

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