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Column 212They realise that most of their costs will be covered by the guaranteed level of services. Therefore, additional services will be possible on the basis of marginal costs.
The hon. Member for Oldham, West simply does not understand any of that. He is out of touch and out of tune. This evening, the hon. Gentleman gave us his synthetic rage rendition, but we all noticed what he did not say. There was no mention of nationalisation, not a word about whether a Labour Government would return the railways to state control, no mention of any policy to reverse 50 years of decline, not a word about what a Labour Government would do to encourage more use of the railways. There was no mention of how Labour would fund investment; not a word about guaranteeing services.
I offer the hon. Member for Oldham, West the sympathy of the whole House, but he and his leader must simply soldier on in silence until the union leaders tell him what is the deal that they must accept for clause IV. Then he can tell us what he really thinks he has been told to think.
As I sat listening to the hon. Member for Oldham, West, I had a feeling that he reminded me of someone. Just before he sat down, it occurred to me who he reminded me of; it was one of those old-fashioned British Rail station announcers. Hon. Members will remember the people who used to make a muffled sound--like this--full of noise, but with nothing intelligible coming out. The Labour party has no policy and no intelligent thought, and says nothing intelligible on behalf of passengers. There is no chance that the House will support the hon. Gentleman tonight. The House will support the amendment.
Mrs. Gwyneth Dunwoody (Crewe and Nantwich): I always enjoy the Secretary of State's performances. He reminds me of a small boy banging a dustbin lid in the dark to drive away the ghosties. He does it with such panache; there is no factual basis, but a lot of panache, and I do admire that.
The Secretary of State and the Conservative party do not represent the passengers and are not at all interested in them. It is important that the House should admit that. The Conservatives are interested in the movement of money. That is what interests them--not the provision of services but the movement of money, and the ability of private financiers or private companies to cream off from state assets that which will improve their own finances. On 14 December British Rail announced the service cuts that it would be forced to make because it was required to improve its financial position by 10 per cent. this year. That announcement so frightened the Secretary of State that, as soon as it became public, he rushed out a statement to say that of course he did not want cuts and that he favoured the line that he has pushed tonight.
British Rail told the truth: it was required to cut its finances by 10 per cent. which would directly affect its current operations. Because the Secretary of State made a great fuss and said that there would be no cuts, that the existing timetable would continue and that all would be well, it became very clear that he had to act. Between 14 December and today there has been a considerable amount of straightforward and hard-nosed negotiation and, somehow or other, British Rail's external financing limit has been expanded by £64 million. That
Column 213has made the difference, and British Rail is now able to confirm that it will maintain its existing services and withdraw its threats of 14 December to cut services.
It is important to describe the money-go-round in considerable detail. Sir Alfred Sherman said recently that he could not see any point in denationalising or selling off any industry that did not make money. He could not see the logic behind the Government's decision to privatise the railways.
For the past five years the Government have pushed British Rail to change its work patterns and to undertake considerable reorganisation and modernisation. If, at the end of that period, British Rail was unable to demonstrate increased profits--indeed, even climb back to the small increases that it had made on some lines in the early 1980s--it would be clear that it would not be able to make enormous profits in the future.
The reality is that heavy subsidies will be provided. The regulator has said that track access charges will be reduced and the railways will earn 8 per cent. on the new assets. The Secretary of State has not explained to the House how the system will fragment British Rail. Calculating assets at a different rate will mean that the taxpayer will pay a great deal more in subsidies in the future. The Secretary of State has assured us, "Don't worry, that money will go around the system. It will be recirculated and it will return to the Treasury when there is a profit."
Mrs. Dunwoody: The passenger service obligation is very important, as is what will happen to the passenger transport executives which have had direct input into the services that they thought were important. They cannot guarantee the future of those passenger services which the Secretary of State talked about tonight because they do not know what the level of funding will be or what extra expenses they will face.
Fragmentation of the service continues apace and the cost of privatisation- -which will be borne almost entirely by the taxpayer--is boosted by totally unnecessary expenditure. The British Rail Business Systems Bureau Services currently leases systems software which is used to control the mainframe computers at Crewe and Nottingham. Two products are leased from Computer Associates, an American software supplier, and there is a licence fee for each package--only two fees in all. Due to the fragmentation of the specialist systems, that company is saying that, following privatisation, it will require a licence fee for each package for each company. There will be at least 80 companies, so it does not take long to work out what the cost will be for new software--that is before we add the expense of computers and the reorganisation that we have heard so much about. British Rail has invested £1.5 billion in the new Eurostar in the past few years. The Government intend to carve up those assets and to offer them free of charge to the private sector. They have done that before in the privatisation process and undoubtedly they will do it again
Column 214here. They will not use the assets to improve facilities throughout the British Rail system or to provide the extra services that the Secretary of State makes so much play about.
I do not know who will build all those wonderful new trains, but I do know that they will not be built by British companies or by British workers. However, the money will come from British taxpayers--that will be our only future involvement in the new trains.
The Secretary of State and his colleagues are proposing a three-card trick of monumental effrontery which will take large sums of money from the railway system and which will generate large sums of money for the private sector--not only the transport element, but the estate agents, lawyers and accountants who are presently working in the system--at great cost to the passengers.
What is happening to British Rail is outrageous. It has undergone enormous change in the past five years and it needs a period of stability. It needs an opportunity to develop in order to meet the challenges posed by other forms of transport. Rail competes with road and air transport, but the Government have not made clear the challenges that British Rail faces.
I am afraid that we may be seeing the end of the railway system in this country. However, we will not see an end to asset stripping because, whichever way one looks at it, privatisation is a giant asset-stripping process. It is a very efficient way of taking money out of taxpayers' pockets, and the cost in social need and increased pollution, apart from the finance involved, will be stupendous. 8.7 pm
Mr. Graham Riddick (Colne Valley): I am grateful to have the opportunity to speak in the debate. This is the first speech that I have made about rail privatisation since I served on the Standing Committee which considered the Railways Bill 18 months ago. What a joy that was--I see one or two friendly, and not so friendly, faces on the Opposition Benches.
During the Committee's consideration--when I was parliamentary private secretary to the then Secretary of State for Transport, my hon. Friend the Member for Norfolk, South (Mr. MacGregor)--I wondered whether it would be better to break up British Rail and recreate some of the old regional companies, such as LNER, the Great Western and so on, that existed before nationalisation.
Privatisation by franchise will provide opportunities for new companies and entrepreneurs to enter the railways market. I am confident that British Rail's managers who have transferred to some of the new companies will contribute to an enhanced rail performance. Rail passengers will benefit from the greater degree of autonomy and commercial freedom within the system. It is important that the Rail Regulator does not shackle the new companies to such an extent that they are unable to innovate, introduce new and different services and try new pricing arrangements.
When we privatised British Airways, we did not insist that the company should ensure that through-ticketing arrangements for flights were available in every city and town. Of course, in practice, they are so available, because it is in British Airways' commercial interests to ensure that potential air travellers deal with a customer-friendly business and can get tickets easily. So, too, is it in the interests of all the rail operating companies to ensure that
Column 215it is easy for passengers to buy rail tickets, which is why, under the new arrangements, far from there being fewer outlets from which to buy tickets, I would expect there to be more.
Similarly, far from simply operating the minimum number of services as specified by the franchising director, the train operating companies will be looking to get more people on to the railways and to run more services for passengers. As my right hon. Friend has said before now, the early feedback we are getting from operators is that that is exactly what they want to do; they want to run more services. That is what private enterprise is all about.
The hostility of Opposition Members to rail privatisation simply illustrates that they do not understand private enterprise and demonstrates once again that, despite the flowery, reassuring words that the Leader of the Opposition might offer the middle classes, the Labour party has not changed its spots. It still dislikes and distrusts private enterprise and free markets. Of course, the reason why the Labour party is able to get away with its scaremongering tactics at the moment is that privatisation has not yet come about and the positive developments which I believe will occur have not yet taken place.
I have come across an extremely interesting development that I shall relate to the House. For a few years the Green party has been running excursions in Yorkshire--a number of them have travelled on the Settle to Carlisle line. Last year, members of the Green party came to me with some concern about the track access charges which had been quoted by Railtrack and I took it up on their behalf. I was also concerned about the effect that privatisation might have on steam-hauled excursion trips.
I am a life member of the A4 Locomotive Society. Along with two others, my father bought the Sir Nigel Gresley from British Railways back in 1966. He is now president of the A4 Locomotive Society. I was concerned about whether the new regime might lead to fewer trips being available for steam engines on the new privatised railways--not a bit of it.
The March edition of The Railway Magazine contains two interesting articles. The first tells how Flying Scotsman Railways is taking over the operation of BR's special trains unit and will be running charter operations including steam trips similar to those run by BR. The second article relates the emergence of a new company called Days Out, which is run by an individual called Mel Chamberlain and has
"a whole trainload of ideas for railtours during 1995." Days Out is planning to run around 60 steam excursions, some hauled by the Sir Nigel Gresley, and The Railway Magazine has described the company's programme for 1995 as "formidable". I shall quote directly from the article:
"The package and diversity of tours planned is impressive and with improved customer facilities, and lower ticket prices, Days Out may well succeed. If Mel Chamberlain does not manage to persuade the long-lost tourer back, it won't be through lack of trying." That is only the tip of the iceberg. New people will come to the railways and new ideas will be introduced. Competition is already being introduced into one sector of the railways. At the end of the day, the key question
Column 216for Days Out is whether it can sell the seats. There will be a significant number of new seats and I hope that Days Out can do just that.
In the private sector the existing management of the gas, telecommunications and electricity companies, the existing management has always managed to improve the performance of once-sleepy nationalised industries. The privatised industries suddenly started to pay more attention to the needs of their customers rather than to the needs of the providers of their subsidies--the politicians and civil servants. They started to tackle the inefficiencies and restrictive practices which kept costs--and therefore prices--too high. That, along with tough regulation, is why telephone charges have fallen by 30 per cent. since 1984, gas prices have fallen by 23 per cent. since 1986 and the prices charged by local electricity companies such as Yorkshire Electricity have fallen by 15 per cent. since privatisation in 1990.
In the days when I had a proper job as a sales manager in industry, I spent a great deal of time travelling around the north of England and Scotland and, because I was not grand enough to have a mobile telephone, I had to use public phone boxes. It was an absolute nightmare finding one, and when I did, it usually did not work--in contrast to what happens today.
At the time of the privatisation of British Telecom, the Labour party said that public telephones would disappear from the streets and roads of Britain. In fact, there are more public phone boxes in existence today than ever before. There were 77,000 in 1984 and there are 127,000 today--and, what is more, they work. In those days it used to take six months to get a telephone installed in one's home; now it takes seven days.
Privatisation has led to improved services. Despite all the negative gloom and doom-mongering by the Opposition, it is just possible that we are on the verge of a new and exciting era when the railways can reverse the trend of decades of fewer passengers travelling by train. Nationalisation failed to reverse that trend; private enterprise now has the opportunity to achieve it by introducing new ideas, new capital and new services. I very much hope that it succeeds.
Mr. Charles Kennedy (Ross, Cromarty and Skye): The speech of the hon. Member for Colne Valley (Mr. Riddick) and that of the Secretary of State will go down in the annals of history as a categorical triumph of hope over experience. If, in later years, we want to measure the words that have been uttered in the House tonight, I suspect that the balance of prediction will lie more accurately with those of us opposed to the entire process than with those who are advocating it.
My hon. Friend the Member for Inverness, Nairn and Lochaber (Sir R. Johnston), at a meeting with the rail franchising director--one of the many hobgoblin figures created by the legislation--reminded Mr. Salmon and the rest of us that when Frankenstein was first created it was a benevolent idea and it was only subsequently that things went wrong and the monster developed a life of its own. That applies to the process of privatisation generally. The fragmentation is debilitating not just the existing rail network but the capacity of Transport Ministers to exercise the degree of ministerial direction that is now required.
Column 217I shall be specific and limited in referring to two decisions taken in December by the franchising director: first, that the sleeper services to Carlisle and Fort William respectively, and Motorail services generally, would not be included in the franchise that will be awarded in due course to ScotRail; and, secondly, what will happen beyond March to May this year in regard to direct links between London and the north of Scotland. I do so in the terms of the motion because I would argue that there has been a grotesque breach of faith and a downright breach of categorical assurances that were given to the House and to representatives of the highlands.
Let us take the phrase "based on" the passenger rail timetable of May 1994. I accept one of the points that the Minister made. I am not here tonight to argue--I draw a slight distinction with the hon. Member for Oldham, West (Mr. Meacher)--for an exact replica of May 1994. It is reasonable to anticipate that "based on" can mean, for example, the existing three passenger services a day between Glasgow and Oban, but that they might run at different times. That can be debated, but it is a reasonable distinction to draw.
But that is quantifiably different from saying that passenger services to, for example, Fort William will be based on the May 1994 timetable but with the exception that there will be no sleeper or Motorail services. That is of a different degree and is a categorical breach of faith.
On 17 February 1993, in a letter to Councillor Duncan McPherson, the convenor of Highland regional council, the then Minister for Public Transport said:
"I assured you that the franchise"--
the one to which I have referred--
"will be based on British Rail's 1994 timetable."
By 15 April 1993, the Minister was even more categorical. He told the Standing Committee that there would not be picking and choosing by the franchising director and that all the services then running would be franchised--"then" being May 1994. That is not the case. There has been picking and choosing by the franchising director and he has decided not to include the sleeper and Motorail services to which I referred.
On 25 May, the former Minister said that the franchising director would consult the appropriate local authorities. He has not done so. It is not just the franchising director who has not consulted local authorities, but the Ministers themselves who are not even willing to meet and listen to the local authority representatives who are travelling on a block booking from Fort William on the sleeper service to lobby the Scottish Grand Committee tomorrow.
The Minister for Railways and Roads (Mr. John Watts) rose --
Mr. Watts: The hon. Gentleman will understand that Mr. Salmon has given an early indication of the approach that he is minded to take towards the sleeper services and Motorail, but the hon. Gentleman will know that he has not yet published a passenger service requirement covering those services. He will do so later in the year
Column 218and that will be the opportunity for those towards whom he has an obligation to consult to say what they think about what is and is not included in the proposals. Anything that happens in advance of that will be decisions made by British Rail under the present arrangements of the protected nationalised railway system.
Mr. Kennedy: The Minister has not been in his present position very long and it shows from that intervention. He clearly does not understand what is involved. I shall quote directly Mr. Salmon's words in a letter of 2 February to the convenor of Highland regional council.
Incidentally, yesterday, the Minister's Department denied that it had ever received an approach from Highland regional council in a letter dated 21 December. That is strange because the first sentence of the letter from the Director of Passenger Rail Franchising begins:
"Thank you for your letter of 21 December to the Secretary of State for Transport."
Someone in the Department must have received it because it was quickly handed on to the director for him to reply. However, yesterday the Department denied any such receipt. The Minister might like to find out what is going on inside his Department before he lectures the rest of us.
What Mr. Salmon says stands in stark contrast to the blandishments that we have just heard. First, he acknowledges that, exceptionally, the announcement of 14 December was made in advance of the start of the consultation on ScotRail and west coast services. He continues: "Clearly, if British Rail proceed with the proposed changes in the May timetable, then these services will be withdrawn before OPRAF starts its consultation process. We would not, in such circumstances, include these particular services in the PSR consultation." I repeat:
"We would not, in such circumstances, include these services in the PSR consultation."
The Minister has just advised us that the services would be part of the PSR consultation, so who is right--the Minister or the director of franchising? What is said in the letter dated 2 February stands contradicts completely what the Minister has just said at the Dispatch Box.
Mr. Watts: The hon. Gentleman quoted Mr. Salmon's letter in which he explained that if services were withdrawn before he starts his consultation on the passenger service requirements he would not be including those services in his passenger service requirement. The hon. Gentleman will know that there is nothing to stop local authorities or rail users consultative councils, or right hon. and hon. Members, putting forward whatever views they have on inclusions in or exclusions from the PSR. I am sure that the hon. Gentleman will avail himself of that opportunity if the hypothetical circumstances that he outlined pertain at the time.
Mr. Kennedy: Well, well, we have already moved our ground in the course of the past five minutes at the Dispatch Box. Let us be clear about one thing. There is a world of difference between consulting over a proposed level of service in a proposed timetable and consulting over a service that does not even feature in the timetable. There is light years' difference in that. Such retrospective consultation makes little sense.
Secondly, the body which, under the legislation, is charged with having the biggest say in the consultation is the rail users consultative committee. What does Major
Column 219General Lennox Napier, the chairman of the Central Rail Users Consultative Committee, say? He has written to Mr. Salmon, our dear friend, in the following terms:
"By making a separate announcement about sleeper services and Motorail prior to releasing details of any of the PSRs, you appear to have pre- empted the consultation process on a highly controversial aspect of your proposals . . . Therefore, to allow time for a proper consultation process to take place, I am writing to request you: (a) to consult the relevant consultative committees about your decision . . . and,
(b), not to permit the operators to discontinue any of the relevant services until your consultation with the consultative committees is complete and you have considered their representations on the subject."
That is the chairman of the Central Rail Users Consultative Committee, set up under the legislation by the Government, speaking on behalf of that body. Does the Minister endorse and support those sentiments? If so, that would send a useful signal to our friend Mr. Salmon on what he should do. Will the Minister clarify that? Does he support that expression? The Minister is uncharacteristically reticent. That tells us all we need to know.
The person to whom we shall be looking with regard to this disgraceful abuse of the guidelines that were laid down by the legislation and the contempt that has been shown for the consultative process has to be the Rail Regulator. I and my hon. Friends had a useful meeting with Mr. Swift last week when he made it clear that where evidence was forthcoming that suggested a breach of faith or irregular procedures he would want to consider that. I express the strong hope that he will do so. Because the great difference between the four franchises announced for consultation last week and the forthcoming one that affects Scotland is that in England and Wales there will be a proper public opportunity to be consulted and to express views through the legislation about everything, but in Scotland there will not. The Minister must face up to that. Therefore, on the wider aspect, in conclusion, clearly the Minister does not have an answer, but his civil servants might be able to dredge one up for him at the end of the debate.
I simply say that when it is environmental policy to try to move more people off the roads on to rail, when it is agreed tourism policy for the Scottish economy that we want to develop our existing links to the south, and when we have just opened a channel tunnel which physically plugs us on to the rail network and infrastructure of the continent of Europe, to be cancelling all UK Motorail services and sleepers to Carlisle and Fort William is a retrograde step of some considerable madness. When that is accompanied by bad faith and bad practice, the House should vote to condemn it at 10 o'clock tonight.
Mr. Richard Ottaway (Croydon, South): When I hear the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) speaking with such authority about rail privatisation, my mind goes back to the debate in which the hon. Member for Gordon (Mr. Bruce), who is now the Liberal Democrat Treasury spokesman, spoke about gas privatisation. He said proudly:
"16 million British Gas consumers can expect only one result--to pay increased gas prices, higher than the rate of inflation, for years to come."--[ Official Report , 10 December 1985; Vol. 88, c. 793.]
Column 220How history has proved him wrong. I believe that it will prove the hon. Member for Ross, Cromarty and Skye wrong on this occasion. Listening to the Opposition, one would believe that they were experts. Yet they know that state ownership in this country has failed. Across the world, country after country has followed the example of the Conservative Government and introduced privatisation. In 1979, the nationalised industries were costing the taxpayer £50 million a week. Today, they earn £60 million a week. Even the Labour party has now lost the will to fight on the issue, and that is typified in its debate about the future of clause IV. The reason why it has changed its mind is that it knows that it has got it wrong in the past. The Government have invested billions in British Rail, and since the war some £54 billion has been invested in the railways. In 1953, some 17 per cent. of journeys were by train, and 24 per cent. of goods. Today, both figures are nearer 5 per cent. and falling. The concept of state ownership is bankrupt. Why? In my constituency, I have no fewer than 12 railway stations, and rail privatisation is always a lively issue. The service from Purley, in the heart of my constituency, to Victoria is not bad at all. There are four trains an hour, and a cheap-day return costs something like £3.20--not a lot of money. Those trains are empty. Yet the A23 through Streatham is jammed full with cars. Why? It is because the railways are perceived to be unreliable and inconvenient. In the peak hours, commuters pay £7.20. They need to use the train, but are faced with crowded, unreliable, unpunctual and, often, dirty trains.
Those customers are dissatisfied. They have no way to complain. Is not that typical of all the old nationalised industries--a centralised bureaucracy funded by taxpayers' money, concerned more with supply than with what the market demands? Why do we not have fewer trains in the daytime and more in the rush hour? The reason is that the railways are stuck on the old requirements to supply services. It astonishes me that Opposition Members-- indeed, members of the public--want us to continue that.
This is where the whole ethos of privatisation comes into the matter. Nationalisation was a central feature of post-war Labour Governments, but few people today deny that it imposed intolerable burdens on the national economy. Labour naively believed that control of the railways would be vested in the people. In reality, power was transferred to monopoly providers and monopoly producer unions. The real power was exercised by civil servants, who became the protector and confidant of the industry's self-interest and, indeed, on occasions, the politicians in power.
Privatisation is now copied throughout the world. I had the good fortune last week to go to Japan, with the President of the Board of Trade, and went on the privatised railway from Tokyo to Nagoya. In a recent report, the transport correspondent of The Times said: "Japan is demonstrating that privatised railway companies can be not only efficient and profitable but also popular with investors."
Column 221As I sat on that comfortable high-speed train, knowing that it was run by private money, I knew precisely what he meant.
I welcome the passenger service requirements, because they will provide a customer safeguard of a minimum level of service. We all know that the expected level of service will be considerably higher, because the incentive to provide more services is there. The hon. Member for Oldham, West (Mr. Meacher)--unfortunately, he is not here now--rather played around with the possibility that the service between Dawlish and the west country may go via Peterborough. What he completely ignored--this shows his ignorance of the workings of capitalism--is that if there was a demand for more services, the operators would provide them.
In future, the customer will be able to rely on two components: a guaranteed minimum service, and a commercially responsive addition to that service. The first operators have already been announced. We have seen the reaction. I do not know how many hon. Members have received the brochure from Great Western Railways, entitled "Business First". It starts with the comforting headline:
"Cruise in comfort at an altitude of 6 feet".
"now, as a dynamic company with a brand new look and a stronger than ever commitment to customer service, we can offer you the standard of travel that truly meets your demands".
"brand new staff . . . Each is a highly trained professional". It will provide
"high quality refreshments and even, on selected services, video and audio entertainment during your journey".
One can also choose various price structures.
We are talking about the old British Rail, but we live in a new world. When the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) said that she feared the demise of the old British Rail, she was absolutely right. We have a new railway coming and a new type of service.
Why do the Opposition continue their opposition to privatisation and make the same old arguments of doom and gloom? They were wrong about every other privatisation. They will be wrong about this one. One has only to look at some of the quotations that they have come up with in recent years to see that. The right hon. Member for Swansea, West (Mr. Williams), when shadow energy spokesman, said about electricity privatisation:
"It strikes me that a minimum estimate of the cost of privatisation to the consumer in terms of price increases is 20 per cent."--[ Official Report , 12 December 1988; Vol. 143, c. 723.] He was wrong.
The hon. Member for Gordon, whom I quoted earlier, said that electricity privatisation
"will result in higher prices for the whole population".--[ Official Report , 10 April 1989; Vol. 150, c. 585.]
He was wrong.
The right hon. Member for Salford, East (Mr. Orme), when shadow energy spokesman, said on the privatisation of British Gas: "There is no evidence that the Bill will improve efficiency, provide a better service, produce cheaper gas or, least of all, create competition."--[ Official Report , 10 December 1985; Vol. 88, c. 780.]
Column 222How wrong he was.
The hon. Member for Glasgow, Garscadden (Mr. Dewar) said of the privatisation of British Steel that it was
"a shoddy measure which promises destabilising uncertainty. It is totally irrelevant to the real interests of the industry".--[ Official Report , 23 February 1988; Vol. 128, c. 238.]
The fact is that British Steel, having made losses of £1.7 million, made profits of £733 million.
The late John Smith, who was then the right hon. Member for Lanarkshire, North and who was not often wrong, said that privatising British Airways
" is a bad deal for the airline and for the British taxpayer". Let us go back to the hon. Member for Garscadden, who is constantly putting his foot in it. He said that British Airways
"will be the pantomime horse of capitalism if it is anything at all."--[ Official Report , 19 November 1979; Vol. 974, c. 53, 125.] The fact is that British Airways has run up a profit of more than £2.7 billion.