Examination of Witness (Questions 860
WEDNESDAY 14 NOVEMBER 2001
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
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.
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
(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 thisand I can understand
why the 162 is of some concern, it is a large sum of moneyon
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 himand 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 regulatorand given the character
of the rail regulator this is no surprisedid 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
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
(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
(Mr Byers) As part of the contingency planning, legislation
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 constituenciesI
certainly do from my constituency on Tynesidethat 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
(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.
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.