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10.41 am
Mr. Richard Ottaway (Croydon, South): We are always pleased to hear from my right hon. Friend the Member for Kensington and Chelsea (Mr. Clark), who has put the alternative view on these matters.
The channel tunnel rail link was announced in February 1996, and there was enthusiasm for and commitment to a project that would be fundamental to the economic enhancement of the south-east of England and the nation as a whole. Conservative Members still believe in the project, retain the same enthusiasm for it and think that it will bring benefits. We share that enthusiasm with the hon. Member for Poplar and Canning Town (Mr. Fitzpatrick), and I congratulate him on securing the debate and on the balanced way in which he made his arguments.
We support the Government's attempt to find a solution to this problem. The project was never going to be easy to complete, and we wish them well. Many people have been embarrassed to travel through France at high speed, only to trundle across Kent at a gentlemanly speed. However, no contrast is more marked than that between north-western France and south-eastern England. The Picardie region of France is flat and empty, and the construction of the railway was not a technical or a financial challenge. In contrast, the route through Kent traverses some of England's most beautiful countryside and passes close to a substantial number of communities. They, and affected London communities, commented vociferously on the project during the passage of the legislation through the House.
Scrutiny of the Bill was intense, with a Select Committee considering thousands of petitions. The agreed route had the support of the vast majority and provided a much-needed framework for the economic regeneration of east London. There is to be a station at Stratford, and a special link to King's Cross and St. Pancras to provide a direct twin-track connection between the CTRL and the west coast main line.
The consortium that won the competition to construct the CTRL was London and Continental Railways, a partnership of six of the nation's leading companies: Ove Arup and Partners, Bechtel Ltd., Sir William Halcrow and Partners, the National Express Group, the Virgin Group and SG Warburg and Co. The key criteria for the evaluation of bids were the size and timing of the Government's financial contribution and the risk that each bidder was prepared to accept. The LCR bid was successful: it needed millions of pounds less in subsidy than the bid of its rival, Eurorail.
Some people say that the project was given too little public subsidy. The then Labour Opposition made it clear that they considered the public subsidy to be too high, yet at the same time they believed that there should have been a public-private partnership with most of the assets given to LCR remaining in public hands. That ignores the fact that, under any public-private partnership, Government subsidy would have been inevitable and would have entailed an even greater public subsidy we are likely to end up with.
Faced with the harsh realities of office, the Deputy Prime Minister's initial reaction was to resist the further use of public funds, no doubt with encouragement from the Treasury. With the benefit of hindsight, we know that the main factor behind the current impasse was the passenger forecast of London and Continental Railways. When the bid was made, the annual passenger projection was 9 million; today, it is only 6 million. The forecasts were put forward by the best experts in the country, but no one could be certain about future passenger numbers and all estimates are subject to a degree of error.
Although LCR clearly overestimated the number of passengers, it is probable that the channel tunnel fire had something to do with that inaccuracy: a six-month delay and a reduced service cannot have helped in marketing the project. The good news is that passenger numbers continue to increase. We should retain our optimism that targets will be hit, albeit late: not even a revised scheme will work if they are not.
LCR is not in a position to proceed, because it cannot raise the necessary funds. We share the view of many people that the proposed route should not be altered. To alter it would require the reopening of the whole inquiry and would cause further unacceptable delays. There is every possibility that a two-phase solution may be found, with Railtrack, in a joint venture with LCR, constructing phase 1 from Cheriton to Ebbsfleet station by 2002, and phase 2 from Ebbsfleet to St. Pancras by 2005.
Despite the opposition of the Local Government Association and others, we give that solution a cautious welcome if it is to be the only basis for a successful outcome. I say to the hon. Member for East Ham (Mr. Timms)--and, indeed, to my hon. Friend the Member for Southend, West (Mr. Amess), who ably represented Newham council--that there may be a gulf between what he wants and what is achievable. He will have to face up to the realities.
We understand that phase 1 could cost about £2 billion, with Railtrack playing a major role. Such a tremendous achievement by Railtrack would confirm the previous Government's decision to privatise the company, leaving it as a strong, well-financed company which can pick up such projects at relatively short notice and make something of them. The whole House will agree that that is a tribute to the previous Government's privatisation policy.
The question of running Eurostar remains to be solved. Although the Deputy Prime Minister, egged on by Labour Members, was excited by the thought of taking the trains back into public ownership, the change in culture brought about by the previous Government will lead him to conclude that a private solution remains the best bet.
One of the more stupid suggested alternatives is the resurrection of the Central Railway scheme which was decisively rejected by the House in July 1996. The proposal was to drive a railway line from the tunnel through the heart of London, causing massive disruption as it went. I urge the Government, if they need urging, not to reintroduce that proposal.
The Minister for Transport in London (Ms Glenda Jackson):
I thank the hon. Member for Croydon, South (Mr. Ottaway) for his support, and congratulate my hon. Friend the Member for Poplar and Canning Town (Mr. Fitzpatrick) on obtaining the debate. As others have said, we are grateful to him for giving us this opportunity. The channel tunnel rail link has probably not had such a high public profile since the idea was launched, and it is a pity that such a level of interest has been generated for all the wrong reasons.
No one would dispute the fact that all the speeches this morning--with, perhaps, the exception of the somewhat curious contribution of the right hon. Member for Kensington and Chelsea (Mr. Clark)--[Interruption.] As my hon. Friend the Member for Thurrock (Mr. Mackinlay) points out from a sedentary position, the right hon. Gentleman has just left the Chamber--presumably to publish his soundbite press release, an action for which he criticised other hon. Members in his speech.
In the main, the speeches have been both serious and informed. The importance of the CTRL, not just as a high-speed link with Europe but for its regeneration potential, was stressed by hon. Members on both sides of the House. It may assist hon. Members, however, if I summarise the events of the past six weeks, and explain how matters now stand.
London and Continental Railways formally notified my right hon. Friend the Deputy Prime Minister on 28 January that it would be unable to meet the terms of its development agreement with the Government without the injection of some £1.2 billion of public subsidy over the next 10 years. That £1.2 billion was on top of the £1.8 billion of taxpayers' money that had already been committed. It did not include the public assets that were also part of the development agreement, which have been estimated to be in the region of £5 billion.
My right hon. Friend the Deputy Prime Minister rejected the proposal. He has left no one in any doubt that he wants the development of high-speed connections to Europe, but not at any price. I trust that that would reassure my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody), who, regrettably, is not present. At a time when fiscal prudence is needed, it would be irresponsible--almost unthinkable--to commit such large additional sums of taxpayers' money, no matter how strong the wish for improved links.
LCR asked for more money because it vastly overestimated the number of passengers who would be travelling on Eurostar by now. The development agreement made those Eurostar projections a cornerstone of LCR's plans for raising project finance. The then Government and LCR should have realised that the forecasts were overblown and unrealistic, but they did not. That was a serious misjudgment, and the present Government should not and will not simply bail LCR out.
My right hon. Friend the Deputy Prime Minister came to the House with all speed, having heard LCR admit that it could not meet its obligations under the development agreement. As he explained in his statement on 28 January, the development agreement with LCR allowed for a 30-day period during which LCR could present revised financing proposals. LCR's shareholders subsequently constructed a framework of proposals, which they put to my right hon. Friend last week. The shareholders envisaged a role for Railtrack. After careful consideration, my right hon. Friend agreed to grant a further extension of the cure period to allow LCR more time in which to flesh out its ideas. The revised deadline is 31 March.
As my right hon. Friend intimated on 28 January, we would like LCR to come up with a solution allowing it to meet its obligations under the development agreement. Against the contingency that no satisfactory solution will materialise, we are still working to provide for an orderly transfer of Eurostar UK Ltd. to the public sector, as is required if the development agreement is terminated. Let me assure the hon. Member for Croydon, South that that would obtain whichever party was in power. It is part of the development agreement that was worked out and signed by the Conservative Government.
I am afraid that I cannot say much more about the point that LCR has reached. Its proposals simply are not developed enough. However, there has been considerable speculation in the press, and I want to put some of what has been reported in context.
There has been much talk of white knights galloping to the rescue. Given the size of the project, it is not surprising that organisations wish to become involved, but the formal position is that the Government have a contract with LCR and no one else. If LCR chooses to bring in other partners, that may happen, but only with the Government's approval. As I have said, it appears that LCR sees a role for Railtrack in the new structure that it is drawing up, but that is its business.
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