Examination of Witness (Questions 660-679)
RT HON STEPHEN BYERS
WEDNESDAY 6 MARCH 2002
660. There is certainty about that, but there is uncertainty about the private element, is there not?
(Mr Byers) In relation to local transport plans, what we have said to local authorities is that they should look at involving the private sector to see if they can get better value for money in so doing, but there is no compulsion on them to do so. It really is a simple value-for-money test. If a local authority, as part of their local transport plan, decides they will not get a better return or better value for money by involving the private sector, there is no requirement for them to do so.
661. Can I ask you about restraint in people's travelling behaviour? You were asked by this Committee whether you thought choice was the best way to change people's travelling behaviour and so alleviate congestion and you answered, "I do actually."that was your answer, that you thought choice was the way through. However, clearly there is a necessity for some circumscribing of choice according to statisticsrail fares have gone up; bus fares have gone up by 13 per cent, and road transport costs are likely to fall by 20 per cent. Surely it is fairly obvious that people will continue to use cars?
(Mr Byers) I think it depends on how we move forward within the 10 Year Plan. The Committee will be aware that the Strategic Rail Authority is conducting a review of fares on the railways at the present time, at the structures and pricing, to see what outcome they will bring forward there. We are looking very closely as a Department at the bus network in particular; I am very concerned that we are putting more money into buses but I do not think we are seeing the improvements many of us would want, and I think that is something we need to be concerned about. I am conscious that in London the Mayor has adopted a policy of effectively not seeing real terms increases as far as fares on buses are concerned, and we have seen a big increase in ridership
662. Just to stop you there, the point is that the Mayor is embracing a policy of driver restraint. The Department seems reluctant to embrace that policy and, in a sense, is passing the buck to local authorities. Is that not a lack of realism?
(Mr Byers) We have not passed the buck to local authorities. I think we are saying to local authorities that this is a power they have if they feel it is appropriate in their own areas, and that is quite different. I was going to make the point that we are looking at the whole costs of rail travel through the SRA review of fares; at the whole question of the level of charges as far as buses are concerned; but what I am not prepared to do is somehow artificially put a burden on motorists to try and put them in a situation where they are paying more so you force people to use the bus or railways. I do not think that is appropriate. One of the things we have been able to do in government is to see the cost of motoring go down in the 10 Year Plan for two principal reasons: (1) there will be further improvements as far as fuel efficiency is concernedsomething which, for environmental reasons I would hope the hon. gentleman would welcome but they will reduce costsand (2) we will continue to see the price of new vehicles going down quite dramatically. The price of new cars has gone down by about 12 per cent over the last 15 monthsthat has made a big difference. If the European Commission move on their block exemption then we will see even further cuts in the price of new vehicles in the United Kingdom.
663. But to go back to the London transport situation, the Mayor has said consistently that when it comes to congestion charges there is no other option. If you are talking about reducing the price of cars that does not seem to be a solutionit is compounding the problem. If there is another option, what does the Department of Transport think it is?
(Mr Byers) The other option, as I think I said when I gave evidence before the Committee before, is to take the steps that we are talking now to lay the foundations for improving the public transport system, and whether it is in terms of rail or bus network we have to take those steps and we are doing that. That is one of the reasons why I want to see the 10 Year Plan, the money spent in a way which sees more money coming upfront, so that during the course of the 10 Year Plan we can see those improvements coming in to the public transport system so that motorists will have a genuine choice as to whether or not they drive their car, get the bus or the train.
664. Your targets, you say, are an 80 per cent increase in rail freight and a 50 per cent increase in rail passenger quantities. Have you fallen considerably behind that rail freight target because of the EWS difficulties, and the French security problems since November last year?
(Mr Byers) There is no doubt that what has been happening in relation to freight coming in from France has distorted the figures considerably and, if that was to continue, then it would have a severely detrimental effect on achieving that target.
665. So what pressure are you putting on the French authorities to stop the situation to make sure that, rather than it just being between 9 at night and 3 in the morning, there are provisions to enable the rail freight to continue?
(Mr Byers) We are pointing out to the French authorities that they have a real responsibility to secure the boundaries to allow freight to go through in a way which is compatible with their obligations, and also to ensure that we do not see people using it as a way of illegally entering our country. The French have given certain commitments about the steps they will take; we have to hold them to that and we have to make sure that, when a fence is constructed it is constructed in such a way that it is strong and cannot be pulled down, but by a few50 or sopeople, and it has to be properly policed.
666. The CRS are not known for their diplomatic approach to policing and, if they decide to clear an area, they do it with some efficacyI put it no higher.
(Mr Byers) They do, yes.
667. Why is it we are still hanging on waiting for the French government to take some real action? It is no use putting people along the track if they do not operate against the people climbing the fences and bringing them down. This is putting British drivers at risk, and the actual would-be travellers themselves at risk.
(Mr Byers) I share the frustration of the Committee about the failure of the French authorities to address this in an effective way. They have the means: they have the ability to deal with it: for whatever reason they have failed to treat this as seriously as they should
668. But there are firms in my constituency going bankrupt because of the inability of the French to take action.
(Mr Byers) And there are firms up and down the country facing those difficulties so we need to make sure the French authorities recognise their responsibility. This will be raisedand is being raisedat the highest levels to make sure that the French take this seriously, and we will continue to do that. I share the frustration of the Committee and this has taken a lot of my time, and it has taken some of the Prime Minister's time, to get the French authorities to look at this seriously, and they have a responsibility and I think most of us
669. But how long has that process taken?
(Mr Byers) It has taken too long, to be very frank, but we will continue to make representations to the French authorities so that they will see that they have to act and take this matter seriously.
670. The point is that you are treating this as a Home Office security matter and, as the Chairman has rightly said, I have potters in my own constituency and their business is being destroyed by this. I personally have written to the Commissioner in Brussels, but this has been going on since November and the implications for your transport plan are inescapably obvious.
(Mr Byers) I understand and I am agreeing with Miss McIntosh about the problems that we have. We are making representations to the French authorities, pointing out the obligations that they have and the need for action to be taken quickly to address this particular issue.
671. Is the truth not really that a French company would like to do the freight operations through the Channel, and that is what it is all about?
(Mr Byers) There is a factually accurate statement in the fact that there is a French company who would like this business. Whether the conclusion then to draw is that the French authorities are reluctant to act because they want to secure the position for the French authorities is clearly the view that Mr Bennett has expressed, but we are clearly aware
672. I was actually asking you for a comment on that.
(Mr Byers) I am not sure there is conclusive proof that that is the motive behind the way the French have responded to this, but I think we are all aware of the French interests in freight coming through the tunnel into the UK.
673. With respect, supposing the situation was reversed? Supposing that what we were seeingand it is a ridiculous thought, of coursewas vast numbers of people trying to flood into France and the British police, the Dover police and the entrance to the tunnel at Folkestone was being policed in such a way that nothing was stopping people fighting their way on to these trains. What would be the attitude of the French government, and what action would they be expecting you to take?
(Mr Byers) I think the difference is we would ensure that the security around the entrance is maintained.
674. But how long are we going to go on talking to the French authorities without getting some kind of movement? With the greatest of respect, in the French system thanks to the Code Napoleon, we can go on for a very long time talking without any real movement.
(Mr Byers) We shall continue to make representations to the French authorities to get them to discharge their responsibilities.
675. You mentioned the East Coast Main Line and the trains to Leeds. Are you aware there will be two trains less to York each day because of the increased service to Leeds, so there are some imbalances there? You also mentioned that you are quietly confident that the investment in the rolling stock will increase. The conversations I have had with GNER are that they will stick to their already declared programme for the investment for the two-year extension but they are not going to make major investment decisions for a period of franchise which has not yet been decided, so it has delayed the long-term investment in the East Coast Line.
(Mr Byers) It depends which sort of particular investment you are referring to. There is £100 million of additional private investment going in as a result of the two-year extension. You are right to say, in terms of the up-grade of the East Coast Main Line, that is not possible until we get a clear specification of the improvements that we want to see. One of the great weaknesses, and this was the impossibility of having to award a franchise last summer, was we were not comparing like with like. What we had was a proposal from Virgin and a proposal from GNER to operate the new franchise but because they were basically given a blank sheet of paper and were told to put in whatever they liked in terms of what they could offer, it was legally very difficult to award a franchise. If we had awarded a franchise for the period that was originally proposed, whoever was unsuccessful would almost certainly have legally challenged that decision because there was no rational basis on which you could award one against the other. When we come up to the franchise being awarded for the East Coast Main Line, which probably will be in line with the model the SRA are now developing, the 15 year franchise, which I think will be welcomed by most of the interested parties, there will be the opportunity of securing focused improvements as far as the East Coast Main Line is concerned without constraining people. There does need to be a degree of flexibilityif there are ideas about innovation and different ways of doing it then a franchise bidder should be able to express thosebut there has to be a core delivered through any franchise, and that is what we need to be working out and, also, within the context of the specific improvements of the up-grades that we want to see delivered on the East Coast Main Line during the period of the new franchise which is likely to be awarded.
676. We heard from the Prime Minister today that the Government's credit rating is so poor it is going to cost an extra £1 billion to raise the money. Where is this money going to come from? Is it going to be taken out of the rail forecast of the investment from the transport plan?
(Mr Byers) I did not hear the Prime Minister say that. The issue will be that in every negotiation that takes place there will obviously be a desire on the part of the financial institution to lower the risk and to raise the level of return that they getthat is the nature of the negotiations that will take place. What we have to make sure of in the discussions we have is that we secure the best possible deal for the taxpayerboth in terms of the financial arrangements but also in terms of the benefits we can deliver to the travelling public. As I have said, there is no indication, and I think the words from Richard Bowker are very clear on this, that post the decision we took in relation to Railtrack there has been a view in the private sector that they do not want to be involved in transport projects. Most of them make a very clear distinction between the arrangements that apply to a body like Railtrack which was quoted on the stock market as opposed to Public-Private Partnerships. It was very interestingI heard an interview on the radio at lunchtime with one of those who had signed the letter that was in The Times this morning, and he made the following comment: "Don't forget this was an investment"talking about the investment in Railtrack's shares"where private investors and pension funds and all other category investor felt they had a contract with the Government". The important thing to remember about Railtrack is it was not a contract with the government: it was buying shares which were quoted on the stock market. So this is not a Public-Private Partnership. Railtrack was a private company quoted on the stock market so there was no contract with the government. Buying shares in a private company is not making a contract with the government, which is why the government saidand the Committee has heard me say this beforeon 2 April last year, when we entered into the agreement with Railtrack, and we made it very clear: "The Government stands behind the rail system but not behind individual rail companies and their shareholders who need to be fully aware of the projected liabilities of the companies in which they invest and the performance risks they face". Nothing could be clearer than that, so I think for some people to argue that by buying shares in Railtrack they had a contract with the government is fundamentally misunderstanding the nature of the relationship.
677. I do not wish to go down that path. I remind the Secretary of State on 2 April last year the Government promised Railtrack, that RenewCo, the new rail company, would come into being and on 4 October it could not because it had public sector borrowing requirements. May I repeat, if it is going to cost the government £1 million more to raise this money, where is the government going to get that money from?
(Mr Byers) I would pray in aid the words from Richard Bowker on the £34 billion we believe we can secure for private sector investment in the railway networkthere is no reason to think that because of the actions we have taken in relation to Railtrack we are not going to secure that level of investment. If I can, on this point about RenewCo, the April agreement is very clear that it would be best endeavours to be used as far as RenewCo is concerned.
678. Can I talk to you about the structure of the £33.5 billion of public finance that is heading for rail under the terms of the 10 Year Plan? My understanding is when you strip out resource spending, according to the figures that your Department has come up with, £18.6 billion of the £33.5 billion is investment money. Of that £18.6 billion, £10.1 billion has already been allocated to the Channel Tunnel Rail Link and Railtrack's network grant, so there is about £8 billion left of spare public cash for the railways. You have said that effectively that moneyand I think the figure is £7.5 billion rather than £8 billionis there to leverage in private sector finance, the £34 billion you need to raise from the private sector, and I have been trying to understand what you mean by "leverage in". If we use a mortgage analysis, are we talking about effectively the deposit on the Government's mortgage? Is that the money that pays 25 per cent and the banks or the private sector comes up with the other 75 per cent, or is that £7.5 billion to pay the interest costs on the mortgage? Is it going to be spent as part of the investment in bricks and mortar, or is it just a financing budget?
(Mr Byers) It will depend on the nature of the deals which are entered into, and there will be a variety of different arrangements that can be secured. What we do believe is that something like £3 billion of that will be direct public sector support for private investment, which is why we net off £3 billion from the overall figure, because if we were to add £33.5 billion of public money and the £34.3 of private money that we expect to secureit is actually a little over bothwe would with rounding up come to £67.9 billion, and some people have made the mistake of just bringing those two figures together saying there is then £67.9 billion of investment, public and private, in the railways. That is not accurate because there is a double count there of £3 billion so we have to net off £3 billion which is this public sector support for private investment. So it is £3 billion that we expect to use for that particular purpose.
679. So would it, therefore, be fair to say that there is only in reality about £4.5 billion worth of uncommitted, uncontracted finance coming from the public sector to invest in rail improvement projects over the next ten yearsthat is to pay the infrastructure costs to share in the bricks and mortar effectively?
(Mr Byers) I think that would not be an accurate way of putting it because that is not looking at both public and private funding that would go into the railway network, and I do not think the travelling public worries too much about whether it is public or privatethey want to see levels of investment. I think what is important is that over the period of the 10 Year plan we will secure this £64.9 billion of extra investment going into rail. That is the important objective.