Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Howie of Troon: My Lords, the noble Viscount is making a most interesting speech, but has he noticed that the report is not about rail privatisation in the United Kingdom?

Viscount Goschen: My Lords, the report is about Community rail strategy. If the noble Lord looks again at the report, he will find that it refers extensively to what has happened in the UK. I very much regret the fact that the noble Lord has not been able to make a detailed contribution this afternoon. Nonetheless, we look forward to hearing from him in later railway debates when he has more time available.

As I was saying, we have also seen new investment by the privatised train operators in new rolling stock. I refer, for example, to Virgin Rail's commitment to

12 Jun 1997 : Column 1016

invest in high-speed tilting trains. Passenger TOCs are committed to investing considerable sums in rolling stock. All of that has been achieved with a saving to the taxpayer over the next 15 years of some £6 billion. In seven years' time, the grant requirement will be about 40 per cent. of what BR claimed for running the services last year. I should be grateful if the Minister could confirm the accuracy of those figures.

I now direct my remarks particularly to the noble Lord, Lord Howie of Troon. It is inevitable that any debate on Community rail strategy examines the clearest possible example of where such major structural changes have taken place--and that is in the UK. I think that it is of considerable significance--indeed, almost every speaker this afternoon has referred to it--that we examine what has happened in this country (albeit over a very short period of time) from the extremely pessimistic predictions that were made at the time of the passage of the Railways Act to the realities of today.

It is against that background that we now see a widespread acceptance internationally that there have to be major structural changes in rail networks. In Japan, Germany, Sweden and the Netherlands there have been steady moves in this direction. We now have before us the Commission's White Paper, which is a further endorsement of this approach. There is a great deal in the White Paper with which we could agree. The central message is that railways have largely been insulated from market forces, and that they will not deliver anywhere near their full potential unless drastic action is taken to revitalise them. There is a greater emphasis on commercial operations, and on redefining the relationship between government and operator. That is precisely what has occurred in the United Kingdom and it is of direct relevance to what is happening in Europe.

When we were in government, we welcomed the White Paper. Indeed, in the explanatory memorandum which was submitted by Mr. John Watts, who was then the Minister responsible for railways, he said that the White Paper successfully identified many of the issues that rail must address if it is to develop and, indeed, increase its market share. Certainly, the recognition that rail must,

    "be more efficient, customer orientated and attractive to users, whilst at the same time reducing the burden on the state for subsidy",
was music to our ears, as it reflects our own determination, which led to the privatisation of the UK's railways. We support the emphasis on greater commercialisation of rail networks and the proposed extension of separation of infrastructure from operations, measures which have, of course, already been implemented in the UK. We welcome the recognition that more freight traffic needs to be encouraged to use rail.

In his explanatory memorandum, John Watts indicated that the then government supported the Commission's objective of increased interoperability of conventional rail where this will improve competitiveness. Measures must be firmly linked to cost/benefit principles. We did not agree that successful financial restructuring required that all past debt be relieved, and we would expect normal state aids criteria to apply. There were, however, a number of areas where

12 Jun 1997 : Column 1017

we did not necessarily support the Commission: for example, we believe that the level of access charges should be set by national infrastructure managers, not by a European body. I should be interested to hear the Minister's comments on the analysis that was put forward by the then government to find out where, if at all, the policies of her government differ from ours.

As was mentioned by my noble friend Lord Geddes, the White Paper is really more of a Green Paper, as it does not contain specific legislative proposals, but is couched in more general terms. Although there is detail in some areas, in others specific detail is lacking.

With regard to the committee's examination of the report, evidence was given from a wide variety of sources. I was certainly very interested to read the evidence of the independent rail regulator, Mr. John Swift QC. He was struck by how far behind the rest of the Community was in rail restructuring. He was quite right to draw attention to the necessity of introducing market forces or increasing efficiency, as the continuing burden on the state for subsidy would not be sustainable. If railways are to have a long-term sustainable future in Europe, these truths will have to be faced and tough decisions will have to be taken.

When considering how the measures proposed in the White Paper would affect the rail networks of Community countries, it is best to start by looking at the UK example. In giving evidence to the Committee, John Watts was clear that the changes made in the UK were in line with the policy objectives set out in the White Paper. That must put the UK in a very special position when it comes to negotiations in the Transport Council, because the UK has the expertise in, and experience of, such a transfer and of structural changes. Indeed, the objectives that are set out in the White Paper coincide to a great extent with the experience of the UK.

This afternoon's debate is therefore of considerable importance. It is probably the first major opportunity the new Government have had to outline in some detail their policy towards the railways and how they intend to apply that approach to their negotiating policy in Europe as regards the Commission's proposals. There are therefore some key questions for the Government to answer, and I am sure that the whole House looks forward with considerable interest to the speech of the noble Baroness, Lady Hayman. The House was probably looking forward rather less to my speech, because I have rehearsed the policy of my party on railway privatisation and railway restructuring on possibly more than one occasion. As we now have wholly new policies to come from the party opposite, we can all look forward with great excitement to hearing from the new advocates of privatisation.

As we know, the Labour Party opposed this policy tooth and nail at the highest level, vowed to stop the privatisation process and, when that looked set to fail, committed themselves to taking back the railways into public ownership. Their subsequent U-turn was most wise, and most welcome, but how far does it go, particularly in view of the general acceptance of the success of the policy, and the consistent moves towards

12 Jun 1997 : Column 1018

following our example from our European partners about which we have heard this afternoon? The Commission's White Paper is the clearest possible example that this is the case. In the light of this, will the Government now be the international advocates of rail restructuring and privatisation? Will they impress their views on their European colleagues? But before we find the answers to those questions, their credibility in Europe on this matter will depend upon how they handle the issue at home. I invite the noble Baroness to tell the House whether the Government intend to accept the current structure of the privatised railway industry and, if not, what changes they propose to make to the regulatory and franchising system, to track access arrangements and to freight facility grants.

Perhaps I may ask as an aside, although I believe that it is a relevant one, whether Railtrack fulfils the eligibility criteria for the windfall tax. I do not want the noble Baroness to be coy and invite me to wait for the Budget. I should like to ask specifically whether it fulfils the eligibility criteria. That is deeply relevant. Does the noble Baroness believe that if such a tax were imposed on the infrastructure operator it would, for example, speed the improvements to the West Coast main line or hinder them?

So far as labour relations are concerned, it is clear that, where there are good incentives for staff to perform well out of the monolithic structure of state railway corporations, real progress can be made. The White Paper notes that railway workers can expect overall employment in the industry to decline but should recognise that their job security depends upon making rail more competitive and that that will require a more productive and flexible workforce. That must be true. I was very interested that, in his evidence, the Transport Commissioner, Mr. Kinnock, said that rail unions faced a harsh choice between losing virtually all the jobs in rail because change had not taken place or making changes which would probably bring about workforce reductions but in a controlled and controllable way.

If the noble Baroness allows her eyes to dwell on the section of her speech that deals with employment issues and how interventionist the Government seek to be, I shall be interested in hearing any comments that she may want to make on the threatened ASLEF industrial action that is to take place fairly shortly. The noble Baroness may not be keen to volunteer an opinion, but I shall respect her very much if she does so.

I see that I have trespassed considerably on the time of the House. However, the issues of vertical integration were ones on which a number of my noble friends and other noble Lords talked a great deal. Suffice it to say that the model that we have seen with the separation of the infrastructure from the operations has brought very considerable benefits.

As to freight, I believe that we have had a very positive discussion this afternoon. In particular, I refer to the speeches of the right reverend Prelate and the noble Lord, Lord Elis-Thomas. They have been impressed by the determination of the new private sector operators to increase market share and receive the full benefit of that improved market share, using all the

12 Jun 1997 : Column 1019

incentives and new investment possible to ensure success. Possibly the most important change has been the orientation towards the customer. I believe that that remark by the right reverend Prelate is very valid.

If this debate had taken place five years ago I am sure that the White Paper would have contained very different conclusions and that the Committee's remarks in its consideration of that White Paper would have been very different. The fact that in the intervening period we have witnessed the biggest structural readjustment in the railways for a very long time--from proposals for legislation through to enactment and into successful operation--has completely changed the game plan. I am very pleased that there is now wide acceptance that this policy has worked. I look forward to hearing the proposals of the new Government.

5.54 p.m.

The Parliamentary Under-Secretary of State, Department for the Environment and Transport (Baroness Hayman): My Lords, I start by thanking all noble Lords who have been so generous in their welcome to me in this debate tonight. The right reverend Prelate the Bishop of Hereford referred to the time we first met when I made a speech to a group of senior boys at Eton. He said that after that nothing could get worse. Sometimes I look at the Front Bench opposite and believe that nothing has changed at all!

A debate in your Lordships' House is a sure way of focusing a new Minister's mind on a subject with which he or she may not have been previously familiar. It is a daunting as well as a salutary experience to reply to a debate in this place where, however specialised the subject, one is always dealing with specialists. Sometimes they come from unexpected places, like the Bishops' Bench today.

I am most grateful to the committee and to noble Lords who have spoken for ensuring that I have at least started to get to grips with this important area early in my time as a transport Minister. I record the Government's thanks to the committee and in particular to the noble Lord, Lord Geddes, both for his work as chairman and for the lucid and authoritative way in which he introduced the debate today.

A large number of specific questions have been raised in the course of the debate by the noble Lord, Lord Geddes, and other noble Lords. I shall attempt to reply to the vast majority of them in the course of my speech. However, I must tell the noble Viscount, Lord Goschen, that at the risk of sacrificing his respect I shall not be drawn into answering questions on putative ASLEF action. Even more so, I believe that it is prudent rather than coy in a debate on European railway strategy not to be tempted into discussing the plans of the Chancellor of the Exchequer for a windfall tax.

The White Paper on revitalising the Community's railways has come at a crucial time. Railway use across Europe, both passenger and freight, has been in decline for many years. This is a trend that must be reversed not only for the sake of the railways but also for wider environmental and transport considerations, as many

12 Jun 1997 : Column 1020

noble Lords have pointed out. The committee recognised clearly the importance of the railway system in Europe in its report and that given the right support railways could become a cheaper, faster and thus more efficient transport option. The Government agree. Like the noble Lord, Lord Methuen, the right reverend Prelate the Bishop of Hereford and the noble Lord, Lord Cadman, we believe that a more efficient and attractive rail system able to compete with other transport modes will also bring significant benefits to the environment by reducing pollution and congestion.

As several noble Lords have said, next year we shall publish a White Paper on an integrated transport policy for this country. I am glad that we have been able to reassure some of the more sceptical Members of your Lordships' House in the first debate on transport issues as to the fulfilment of that commitment. The White Paper will set out a long term strategy and a sustainable framework for decision-making on transport issues which takes into account our responsibility to safeguard the environment. I am grateful for the support of the noble Lords, Lord Cadman and Lord Elis-Thomas, in this respect. We believe that this meshes very well with the European approach set out in the White Paper.

The Government therefore share and welcome the committee's support for the White Paper and agree with many of the initiatives proposed by the Commission. There is a great deal of work to be done. We shall need to consider carefully the best way of proceeding in the interests of the United Kingdom. I hope noble Lords will understand that the Government are still developing their detailed policy in a number of areas, but I should like to take the opportunity today to respond in general to the White Paper and the conclusions that the committee drew from it and to answer points that have been raised in the course of the debate.

At the outset, I believe that it is important to flag up the clear shift in approach in the new Government's attitude to Europe and the European Union. We want the United Kingdom to be a leading player in Europe--a contributor to and a shaper of policies. In this spirit we shall take a more positive attitude in a number of areas. We see Europe as an opportunity for the United Kingdom--for jobs, working conditions and trade. The United Kingdom presidency next year gives us a real chance to make an impact. We want to make progress towards completion of the single market, tackle unemployment and promote flexible labour markets. Positive action in the rail sector will contribute to all those aims.

It is clear that we are dealing today with a fundamental transport issue for Europe. Mr. Neil Kinnock, the European Union Transport Commissioner, whose evidence to the Select Committee has been referred to by several contributors to today's debate, was asked whether the main motive behind the White Paper was commercial, environmental or to do with the dreaded word "interoperability". He replied that all of these issues were significant but that at root it was a question of survival for the railways. He saw the rapid demise of the rail sector not only in terms of its railway consequences but as a serious additional threat to an already overburdened road system. That point was also made by the noble Baroness,

12 Jun 1997 : Column 1021

Lady Thomas of Walliswood. He described the potential effects of further decline in terms of the economy, employment, the environment and the efficiency of transport movement within and across the single market as devastating. The Government agree with the analysis of Commissioner Kinnock and the committee that change is urgently required; moreover, the Government have the political will to bring about such change.

It may be helpful if I say a word or two about privatisation. It is tempting to follow the invitation of the noble Viscount, Lord Goschen, and reopen the debate about privatisation within this country. But it would not be appropriate to go into that matter in detail--tempted though I might be--in a debate on European transport matters. I should point out that privatisation is neither a prerequisite nor a requirement of the proposals in the White Paper. The main changes which the Commission has proposed, and with which both the committee and the Government agree, can be achieved within the framework of a well-run state rail sector.

The timing of the White Paper is significant because, as noble Lords are aware, many countries have already restructured or are in the process of restructuring their railways to give effect to EC Directive 91/440. That directive, which came into force in 1993, requires member states to separate the management of railway infrastructure from the operation of train services so that in terms of management, administration and accounting, the railways are afforded independent status--an issue referred to today. It also allows international groupings--that is, associations of companies in different member states--access to the networks of those countries where the railway operators are based, as well as transit rights in between. The White Paper rightly says that further restructuring is necessary if the process of regenerating the European rail sector is to continue. On the question of debt, for example, financial restructuring is essential if a transparent system for the allocation of, and charges for, train paths is to be realised.

Perhaps I may reply to the noble Lord, Lord Geddes, with regard to the Government's attitude towards the cut-off date for the relief of debt. The Government are not wedded to the one date of 1993. But whatever date is chosen it must provide the right basis for sound financial management.

In pursuing the extension of open access, a principle with which the committee agrees, questions such as whether international services should take priority over domestic services will need to be addressed.

The committee commented on the Commission's suggestion of the creation of a European railway agency as a possible means of resolving the problems of infrastructure allocation and the general integration of national railway systems. Its view was that if such a body were to be set up, it should be more of a regulatory authority than an agency. That is obviously an area at which the UK and its European partners will have to look more closely as proposals are developed. It will be necessary to identify those tasks which could usefully be undertaken, or those areas which need to be

12 Jun 1997 : Column 1022

regulated, and then ensure that the existing mechanisms could not be improved before the case for such an agency or authority could be demonstrated. That is an issue at which we need to look in some detail. I hope that that helps noble Lords who raised the issue.

The committee also welcomed the concept of rail freight freeways. My noble friend Lord Berkeley and other noble Lords referred to that important issue in some detail. The aim is to develop international freight services with freer access and better co-operation and co-ordination between rail freight operators and infrastructure managers. I hope that will be welcomed by the noble Lord, Lord Elibank, despite his pessimism about the scope for change. This would include "one-stop-shop" facilities to deliver fast-response, coherent path allocations across borders and an approach which encouraged the players to market an end-to-end product, beyond a purely national perspective.

As your Lordships will know, a high level group of member states' representatives has been meeting under Commission chairmanship to take the rail freight freeways initiative forward. The Commission sees the freeways idea as an interim solution pending multilateral agreement to further liberalisation of freight access rights, an objective which we share in helping to complete the single market in the transport sector.

It may be helpful if I say a word or two about the latest position on freeways. The Commission has submitted within the last few days its review of the work of the high level group to the Council of Ministers. The review summarises the action to be taken by the member states and their railways and identifies a number of key issues for resolution over the longer term, notably track access charges, train path allocation and the establishment of a performance regime for freeways. The Commission concludes by suggesting a wider remit for the high level group, broadening the debate on longer term issues to encompass passenger services as well as freight. On a more practical level, there are active proposals for the early implementation of the freeway concept on a number of routes: one is a north-south freeway linking the Netherlands and Italy. Another is UK-Hungary, which is also the subject of an application for funding under the pilot actions for combined transport scheme from the European Freight and Logistics Leaders Club in which a number of UK-based rail interests are prominent.

The Government very much welcome the fact that the UK will be among the first in taking active steps towards making the freeway concept a reality and we shall be supporting the application for PACT funding. We hope that freeways can be developed quickly in other member states and the benefits of flexibility and more open access exploited to the full.

The noble Baroness, Lady Thomas of Walliswood, asked about the French Government's attitude in that respect. The French had previously opposed the White Paper, and, in particular, the proposals for extending open access. However, the restructuring of SNCF has recently been completed, and we hope that that will preface a more pragmatic approach by the French. The

12 Jun 1997 : Column 1023

noble Baroness asked also about the opportunity for piggyback services on the West Coast main line. We understand that Railtrack is currently examining the opportunity for a freight upgrade. We expect to know more when those investigations have been completed.

There is much else to be commended in the White Paper. As the committee noted, many member state railways are burdened with substantial debt; that prevents competition on equal terms, as the noble Lord, Lord Mountevans, said. Investment has not always met business needs and the decline in the attractiveness of rail has led to reduced revenue. Relieving debt and allowing independent financial management will allow the railways to keep track of their costs and revenues and enable subsidy to be focused where it is needed; for example on the provision of a guaranteed level of socially necessary rail services.

In addition, the Commission has put forward proposals to separate the management of infrastructure and the provision of train services into distinct business units, with separate management and balance sheets. The committee, I know, was not convinced of the merits of that proposal but, after a slow start, many member states, including France, which until recently was strongly opposed to the idea, are now taking this route. The Government believe that it makes sense. I shall reply to the concerns of the noble Lord, Lord Geddes, by reiterating the point made by Commissioner Kinnock, that the fundamental reason for seeking the change was to help new entrants gain entry to the market and to enable a competitive, commercial relationship between the providers and users of the infrastructure.

In terms of trans-European train operation, the Government agree with the committee that it would be more cost effective to pursue the benefits of greater interoperability by developing compatibility in systems and equipment rather than by aiming for total harmonisation. The noble Lords, Lord Methuen and Lord Geddes, referred to those issues. We support the aims of the existing interoperability directive which applies to the European high speed train network. But for this directive and any future proposals for conventional rail lines, we believe that technical and administrative measures to effect interoperability should be kept to the minimum necessary to ensure the safe and efficient running of through trains on the network. At the same time the potentially high costs of interoperability should not be allowed to outweigh the benefits. The UK is playing an active role in the preparation of technical specifications for interoperability with a view to producing practical solutions within a realistic timescale.

My noble friend Lord Berkeley asked about sleeper services through the Channel Tunnel. I understand that those services are under review by Eurostar and its European partners. Under the railway regime that we presently have in this country it is for the railway companies alone to decide what services to introduce and when.

Noble Lords drew attention to the fact that restructuring Europe's railways and the resulting improvements in efficiency have led to a reduction

12 Jun 1997 : Column 1024

in the railways' workforce. The noble Lord, Lord Elis-Thomas, spoke about that. Perhaps I may make clear the change in this Government's attitude as compared with the previous Administration's negative response to the committee's recommendation that the European Social Fund might be used to mitigate the impact of job losses. We believe that every avenue should be explored to make it easier for redundant employees to find new jobs and share the committee's view on the issue. However, with only limited funds likely to be available, they should be aimed at those areas where redundancies exacerbate existing regional unemployment problems. We will need to ensure that there is a sound legal base for use of funds in this way and that they are properly targeted--not simply used to bail out those members states which have made no provision for redundancies at the expense of those which have.

The White Paper contains many positive ideas for ensuring that rail becomes an attractive, viable alternative in comparison with other transport modes, most of which were endorsed by the committee. The UK, which has already implemented many of the Commission's proposals, will take an equally positive approach in assisting the Community to achieve its goal. We have experience in this field which we can share with our European colleagues. Our presidency of the EU in 1998 provides a valuable opportunity which we are determined to take.

In conclusion, I would like to reiterate the Government's gratitude to the committee for its important contribution to the wider debate on the future of Europe's railways and for recognising that major change is needed, not just at national but at European level. This Government are determined to contribute positively to this change and intend playing a full part in the concerted effort that is necessary to achieve a new era for Europe's railway system.

6.12 p.m.

Lord Geddes: My Lords, it is customary on these occasions to say what an interesting and valuable debate we have had and for the proposer of the Motion to thank all those who have spoken. But we have had an extremely interesting and constructive debate and I thank all those who have spoken.

I thank in particular the noble Baroness the Minister for a very comprehensive and constructive reply. If I heard her correctly, relative to the committee's report--and that is the only reason why I am standing and not sitting--she disagreed with its conclusions in only one respect. That was concerned with the separation between infrastructure and operation. I reiterate that the conclusion of the committee was neutral in that respect. We said that we did not regard it as a necessity. We did not express an opinion as to whether we thought it was good or bad. Our conclusion was that different countries should or would approach the matter in different ways given their national characteristics and--dare I say it?--problems. Therefore, we have reached the situation in which the Government concur with all the committee's recommendations, which is a very satisfactory situation.

12 Jun 1997 : Column 1025

It is not my job to go through every speech that has been made and it would be invidious to do so. However, perhaps I may make a couple of points. First, I greatly welcomed the contribution of the right reverend Prelate the Bishop of Hereford. I hope that he can encourage his fellow Lords Spiritual to join in such debates more often. It genuinely adds to the debates, and we are very grateful to him.

The right reverend Prelate believed that there was an underestimate of the scope for transfer from road to rail. My noble friend Lord Elibank took the opposite view and poured slight scepticism on that belief. The committee was extremely disappointed that on the evidence there did not appear to be great scope. I draw the right reverend Prelate's attention to paragraph 85 in particular, which states:

    "While supporting rail for these reasons"--
economic, environmental and all the other reasons--

    "we recognise that the revitalisation of rail, even on the most optimistic forecast, is likely to have in itself only a minor impact on the overall balance of transport modes".
We found that conclusion intensely disappointing, but on the evidence we received we could reach no other conclusion. As your Lordships know, a report can be made only on the evidence received.

The noble Baroness, Lady Thomas of Walliswood, spoke of the regulatory authority. We put forward that suggestion, if I may use lay terms, because we thought that it would be necessary to have a really strong referee or umpire who could knock heads together and perhaps ultimately say, "Look, you will do it this way and not that way because the two sides cannot agree". That was the point of our emphasis on a regulatory body. I note the Minister's remark in that context and I concur. Let us wait to see whether existing agencies and authorities can do the job. The committee, in conclusion, doubted it, but I take the point that we should wait and see.

The noble Baroness, Lady Thomas of Walliswood, gave me a good opportunity to refer to a previous report of the committee under the inestimable chairmanship of my noble friend Lord Elibank; namely, that on the weights and dimensions of road vehicles. If the noble Baroness cares to look at the report dated 26th July 1994 she will see conclusion 49, which states:

    "We are persuaded that 44 tonnes spread over six axles causes significantly less damage than 38 tonnes over five".
Therefore, we do not concur with her that more weight is necessarily more harmful.

It has been a good debate and I thank all those who have taken part. I commend the Motion to the House.

On Question, Motion agreed to.

Next Section Back to Table of Contents Lords Hansard Home Page