House of Commons Hansard Debates for 24 May 1993

(d) the Board, or any wholly owned subsidiary of the Board'. Amendment No. 237, in clause 5, page 6, line 9, at end insert-- (c

(to ensure that the levels of fares charged or to be charged under a franchise agreement are reasonable to passengers'.) Government amendments Nos. 110 to 112, 153, 162, 13, 166, 164, 165, 168 to 172, 174, 179, 177, 180 to 182, 184, 72, 80, 85 to 88, and 24 to 28.

Mr. Freeman : I will speak to new clause 4 and the other Government new clauses of which there are a great number. I will explain relatively simply what they are intended to do. They all relate to the powers of the franchising director.

Government new clauses 4 and 13 replace clause 68. They improve the drafting of the Bill. They extend the powers of the franchising director in obtaining information to a much wider range of bodies. At the moment, clause 68 specifically gives the franchising director power to obtain information from BR to prepare information for a bid for a franchise.

New clauses 4 and 13 extend the powers of the franchising director to obtain information from Railtrack and from station licensees to prepare the necessary information to advertise to the private sector what is on offer in terms of a franchise. That will enable the franchising director to prepare proper information. There will certainly be sufficient time for the private sector to bid for the franchise.

8.15 pm

Clause 24 is replaced by Government new clauses 13 and 23. The purpose of those new clauses is to give the franchising director powers of designation, protection and transfer of what are called designated franchise assets. The new clauses provide, in the Government's judgment, a clearer regime. In particular, for the first time, the franchising director will be able to designate leases of rolling stock. As those are clearly rights of the operating companies and assets which do not belong to the

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franchisee or potential franchisee, the franchising director will have the power to control the continued use of leased rolling stock on a particular line.

An amendment to which we shall come later should be read in conjunction with that new power. It gives the franchising director the right to roll forward leased rolling stock from one franchise to another. The purpose of that amendment is to enable the leasing industry to have sufficient security in writing long-term leases, even though a particular franchise might be for a more limited period.

Under those Government new clauses, the franchising director will be able to designate assets, rights and liabilities. The new clauses also provide for designation of those franchise assets by agreement with the franchisee. We believe that that is important. They will be protected under the franchise and there are provisions in relation to assets, removed at the end of a franchise period from one franchisee and passed to the next, for appropriate values to be paid to the franchisee at the conclusion of his franchise. There is also a provision which places on a statutory footing the obligation of the franchisee not to encumber certain assets.

I hope that that is a concise introduction to the amendments.

Mr. Cryer : Before the Minister concludes,new clause 4 to impose criminal penalties, albeit through the courts? The power will apply if a person fails to provide adequate notice or if he or she alters documents. Does not that suggest that the proposed system is fraught with legal difficulties, arguments and deceit? New clause 4 provides for the standard of production in civil proceedings and it adds on criminal offences. Does not that envisage serious difficulties in the work of the franchising director?

Mr. Freeman : I do not think so. The hon. Gentleman will realise that the franchising director is established as a non-ministerial Government Department, answerable to the House through my right hon. Friend the Secretary of State for Transport. Therefore, he constitutes a public body. It his duty to let by franchise the responsibility for running passenger rail services. Therefore, there should be some compulsion available to him to obtain information. We are not simply talking about BR or Railtrack--and it is intended that Railtrack shall be a Government-owned company. There may also be private providers of infrastructure and, for example, private sector station licensees.

If the franchising director needs to obtain information to enable him to relet a franchise--or to let one initially--it should be within his powers to obtain that information. That is the reason for the sanctions in Government new clause 4, to which the hon. Member for Bradford, South (Mr. Cryer) has drawn the attention of the House. He was right to do so. That does not imply that there is any web of deceit or malevolence among those who seek to provide station services, network services or franchised passenger rolling stock services. It gives the franchising director the essential power that he needs.

I note that the group of amendments includes amendment (a) to new clause 23. I am sure we shall hear a speech on it shortly from the Liberal Democrat Benches. It is important that the House should recognise that it is

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not intended that British Rail should have any determinate length of responsibility for running franchise services once an initial franchise is let.

As I understand it--I look forward to responding in due course--amendment (a) to new clause 23 provides the power to transfer assets from the franchising director to British Rail for a period to run services if the franchising director decides that that is the best solution. I look forward to hearing the arguments. I shall argue that the franchising director will look to British Rail in certain circumstances. But the franchising director can and will make management arrangements with British Rail to provide the services. There is no need to give British Rail either a formal franchise or for there to be a formal arrangement between the franchising director and British Rail.

Mr. Wilson : We have here a preliminary skirmish on some of the issues that we will return to in more detail during tomorrow's debate. As the Minister said, these new clauses and amendments are to some extent technical. Some piquancy has been introduced to the group of amendments by the amendment tabled by the right hon. Member for Tonbridge and Malling (Sir J. Stanley) on fares and the franchising director's role in that, and also of course by the hon. Member for, North Devon (Mr. Harvey) who has raised the subject of British Rail's right to do anything after the legislation is passed, if it is passed in its present form.

The amendments also give rise to some discussion of the powers of the franchising director. I see the director as a figure who will be of great convenience to the Government, in that responsibility for everything that happens on the railways will then be transferred to him. The Government are looking for a figure of whom they can say, "It is nothing to do with us. This is the franchising director's job. It is he who has made the decisions and the idea of holding Ministers responsible really is quite ridiculous."

I can tell the Minister that the Government will not get away with that. The creation of the structure is the responsibility of the Government. When things start to go wrong--as they certainly will for the reasons that my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) outlined in the previous debate and for the reasons that we can see in this debate-- I assure him that it will be political responsibility that is carried. It will not be the franchising director who does not have the money to sustain the system. It will not be the franchising director's fault when franchises fail and such measures have to be brought into play. There are things that we can welcome. If the legislation goes ahead, clearly it would create additional difficulties if every time that a franchisee changed, it was all change for rolling stock and everything else. As the principle of leasing, which is a far more rational and intelligent form of private sector involvement than anything that we have heard from the Government, was first suggested by the Opposition, it would be illogical of us to oppose the idea that leasing should be made possible by a recognition that the leased rolling stock would carry over from one franchise period to the other. However, that does not acknowledge the sense of franchise periods. That is a separate story.

We support leasing. It is a sensible way of creating investment in the railways. It is a sensible way of giving

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work to the railway manufacturing industries. Of course, leasing could have been introduced years ago. It is not in the least dependent on anything else in the Bill. It is remarkable that the Government took so long to come round to our way of thinking. The rest of the new clauses and amendments are not controversial. We support the amendment tabled by the right hon. Member for Tonbridge and Malling. We also support the Liberal Democrat amendment, on which we shall vote later. The right hon. Member for Tonbridge and Malling and his colleagues suggest that the franchise director should have a responsibility

"to ensure that the levels of fares charged or to be charged under a franchise agreement are reasonable to passengers".

I have no wish to pre-empt what the hon. Gentleman intends to say, but if the Government do not accept the amendment as a signpost that many Conservative Members are extremely discontent with the Bill, they will not accept much else.

It is surely reasonable to expect the franchise director to have responsibility and take an interest in the level of fares charged by the operators. All the pressures in the Bill will be to force fares upwards. The financial regime which will be put in place will force fares upwards. The main pressure will come from the profit element, but the structure will depend largely on the level of subsidy. There is no guarantee that in future the subsidy will be maintained at its present rate. Indeed, we believe that a large part of the Government's operation is intended to reduce that level of subsidy, and hence the cost of the railways to the Government.

The Liberal Democrat amendment, which will also have our support, is straightforward. It raises the principle of involvement of British Rail in what happens after the legislation is passed, if indeed it is. The franchise director can apparently transfer assets to virtually anyone in Christendom except the people who at present run the railways. Here we see the Government's prejudice against British Rail. It is further confirmation that the purpose of the Bill is to squeeze British Rail out of existence. The Government intend to erode it steadily. Prejudice is the only word that I can use because it is difficult to see any rationale behind the Government's position. The Minister's attitude to the Liberal Democrat amendment seems to confirm that anything which sustains or extends British Rail's role is anathema to Ministers. We shall deal with that approach in much more detail tomorrow. The tone of the Minister's remarks must be offensive to some Conservative Members. It will certainly be offensive to people in British Rail who work to make the system function as well as it does. The blinkered focus of so much of the legislation is that British Rail must be squeezed out of existence by whatever means possible.

Like the Minister, I hope that I can catch your eye later, Mr. Deputy Speaker. I give notice that we shall support the amendments. I look forward to much more discussion of the principles which underlie them as we proceed.

Sir Teddy Taylor (Southend, East) : I wish to put four questions to the Minister. I think that they are relevant to the new clauses. I appreciate that many hon. Members wish to speak. New clause 4 says that any person shall furnish information. Does that information relate to nationality? I was astonished, as I know that you will be, Mr. Deputy Speaker, to hear that while foreign railway

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companies such as the French or Belgian railway network will be permitted to put in a bid for the Fenchurch Street line, British Rail will not.

I find it unthinkable that British Rail might be able to tender for the Fenchurch Street line only by securing a French subsidiary company. I hope that the Minister will bear in mind our obligations under European Community law, and will ensure that no one is treated unfairly. I hope that he can assure us either that national railway companies will be able to put in a bid, or that they will not. I think he will accept that it would be rather unfair to the people of Southend, and rather alarming for them, if they were subject to control by a French company rather than by British Rail--for which they have a high regard, despite the dreadful service with which they are provided.

8.30 pm

My second point is fundamental. Can the Government assure us that, when the franchises and information are sought, the people--including hon. Members-- will be able to see what is being asked for? I think that, if the franchising director decides that he wants the Fenchurch Street line to have two trains--perhaps on Wednesday, every second week--the people of Southend are entitled to have that information. I hope that the Minister will make it abundantly clear that, if the franchising director is looking for bids, the people will know what is being paid for. As he probably knows, there is a certain amount of suspicion about the whole business in some parts of the country. Thirdly, can the Minister give an assurance that the franchising director will consult the respected rail passenger organisations in Southend and elsewhere? The Government now seem to be setting up quangos constantly. I remember a time when Conservatives used to complain about quangos, describing them as nasty, costly nonsenses created by socialist Governments. In fact, we have set up far more quangos than any socialist Government, and they are becoming more expensive and more bureaucratic. When I look around my own country--including a place called Chelmsford, which some hon. Members may have observed--I find that many people are employed by quangos, and that it costs a fortune. It is all very sad.

I have a high regard for the Minister, and I know that there is no way of preventing the Government from rushing to create a mass of new quangos. I hope, however, that he will at least assure us that the exciting new quango known as the franchising director will have an obligation to consult rail users' associations.

Finally, let me convey a simple request from Southend-on-Sea. Our rail system is wildly out of date. Let me pay a personal tribute to the Minister, along with my right hon. Friend the Member for Southend, West (Mr. Channon) : he agreed to new signalling equipment for the line. It is only fair to point out that the signalling at Fenchurch Street station is older than I am : that shows that it is rather out of date. However, we have now been assured that something will be done--and we hope that it will, despite the problems facing the Treasury. My right hon. Friend and I- -along with all the travellers of Southend--also hope that this exciting new arrangement will ensure the provision of new rolling stock on the Fenchurch Street line. We respect the Minister. He has said things that we have found to be correct, which is rather unusual in

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Ministers nowadays ; he has forecast developments that have actually come about--which, again, is commendable and unusual. Given our trust in the Minister, based on what he has done for us in the past, we hope that he can answer the four points that I have made. If he can, it will greatly reassure the people of Southend, who have suffered a great deal and who hope that the Government's exciting new plan will limit their sufferings in the future.

Mr. Nick Harvey (North Devon) : The Minister anticipated that I would want to speak to amendment (a), and I intend to do so. The new clause strays further into the realm of BR's future involvement in the railways, which will clearly be a substantial matter for debate tomorrow.

Only a few minutes ago, we were considering Government new clause 16 and the principle of BR running services that are not franchised--that is, operating services before the creation of a franchise. I wonder why it should be so out of the question for us to discuss BR's involvement after the ending of a franchise. It strikes me as the height of absurdity that, under Government new clause 23(1)(b), the franchising director will apparently have to go to the lengths of setting up his own subsidiary company to run services where there will be no other franchise. As the hon. Member for Cunninghame, North (Mr. Wilson) pointed out, that rules out the obvious party to which the franchising director should turn in such circumstances--the only experienced operator in the land, British Rail.

The amendment would not set up a formal BR bidding process at the end of a private franchise. There would be no obligation to hand everything over to British Rail ; that would simply be retained as an option, at the franchising director's discretion. The experience of London Buses is vaguely comparable to what we are discussing. In some cases, at the end of a private franchise, the service has reverted to London Buses.

I agree with the hon. Member for Cunninghame, North : the Government's proposals are based on ideology--on a dogmatic determination to squeeze BR out of existence. If, at the end of a franchise, it is decided that there will not be another franchise for some reason, and the franchising director contemplates handing over the service to BR--the Minister has conceded that that could be done on the basis of, for instance, a management agreement-- it must be because something is wrong.

The fact that the existing franchisee is not coming back for more, or there is no queue of potential franchisees waiting to take over, suggests that the franchise is failing. In such circumstances, the option--the right--to hand the service to British Rail would be a valuable tool in the franchising director's armoury.

If, as has been suggested, that could be done simply through management agreements, why not write it into the new clause and enable the assets to be handed over? How, through a management agreement, can BR run a service without being given the franchise assets--the trains and everthing else on the line? How can any management agreement cover BR's ability to operate such a service if it is not given the tools with which to do so?

I admire the conviction with which the Government are planning ahead-- burning the bridges behind them ; doing without any safety mechanism to catch the pieces if the whole thing falls apart--but I am forced to doubt their

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judgment. They are impressively buoyant in their approach to a scheme that is almost universally derided by those outside their ranks.

The Government believe that the introduction of the private sector through the franchising set-up that they anticipate will result in a reduction in the cost to the Exchequer ; but many of us do not. They believe that a queue of interested parties is champing at the bit to take on these services ; but many of us do not. They believe that the private sector whizz kids will come in, improving services and increasing revenue ; again, many of us do not. The Minister himself has agreed that, if the private sector is unable to come in and increase the revenue, there will be a disaster. How right he is. At present, none of us knows who is right. No one can say for certain whether the Government, in their buoyancy, conviction and optimism, are right, or whether the many others who have considered these matters and retain some scepticism are right. Let us just suppose that it is we who are right--we who are sceptical about the potential success of the scheme--and that franchises start to fail. If one private franchise fails, why should another on the same line and service succeed? What would happen if nobody came forward to take it over?

If the amount that the franchise director has to offer to try to tempt people in to save the day in those sorry circumstances is more than it would cost British Rail to run the service, the National Audit Office will probably take an interest in the matter, as it would amount to the squandering of public funds. It would be in the best interests of the Minister and the scheme if that fallback option and safety net could be continued. I sincerely believe that the Government are displaying pig- headed obstinacy and that the British Rail option should remain available to the franchise director.

Sir John Stanley (Tonbridge and Malling) : I wish to speak to amendment No. 237. Through you, Mr. Deputy Speaker, I should like to express my appreciation to Madam Speaker for selecting the amendment at a late stage. I believe that it is extremely important for the House to discuss the amendment, and Madam Speaker has done the House a service by enabling hon. Members to debate fares policy. As the House may know, I expressed strong reservations on Second Reading about the effects on fares of my right hon. Friend the Secretary of State's British Rail privatisation proposals. My fears were based on a combination of three factors, which all appeared to me to show that a strong upward pressure on fares would be created. The first was that the private sector franchisees would certainly look for a significantly higher rate of return than is currently being obtained by British Rail and is being sought by the Treasury as a rate of return on capital by British Rail.

Secondly, there is no certainty about the level at which present subsidies will be continued for British Rail, particularly in relation to Network SouthEast. The Government have made a commitment that subsidies will continue, but have declined to say at what financial level. The subsidies might be cut by half, two thirds or three quarters, which would result in further upward pressure on fares. Thirdly, the Bill does not contain a specific provision to moderate the level of fares that can be set under the franchise proposals.

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Since I expressed those concerns on Second Reading--concerns that were also expressed in other parts of the House and by a number of hon. Members--there has been remarkable agreement in the comments on the fare implications of the proposals. The House has had the benefit of the Select Committee report, which expressed a similar view. Outside the House, there has been a host of reports by independent firms, consultancies, independent commentators, transport user groups, consumer interests, including the National Consumer Council, and major local authority associations such as the Association of District Councils, the Association of County Councils and the Association of Metropolitan Authorities. They have all come to the same conclusion : that the pressure on fares will tend to be upwards. Against that background, I urge my right hon. Friends on the Treasury Bench to give the most serious consideration to that substantial weight of opinion from all quarters on the proposals' likely fare implications.

8.45 pm

I tabled amendment No. 237 because, although the Bill has now reached its Report stage, there is still no sign of material moves by Ministers to allay my fears on the fares issue. I had hoped that, in Committee, the concerns that I had expressed on Second Reading would be at least partly met, but unhappily that is not so.

Since I spoke on Second Reading, there have been two policy announcements. At virtually the eleventh hour and 59th minute of the Second Reading debate, my hon. Friend the Minister for Public Transport popped into his wind-up speech a significant statement of policy. I believe that it appeared there for the first time, unless it had previously escaped me. He said :

"We propose a cap on fares for those services which are a monopoly, and I can confirm that the commuting lines into London constitute a monopoly."-- [Official Report, 2 February 1993 ; Vol. 218, c. 243.] That constituted acceptance of the principle of a cap.

Tucked away in the voluminous documentation submitted to the Standing Committee was a paper entitled, "Draft Objectives of the Secretary of State for the Franchising Director". It contained two paragraphs with the arresting title of "Fare Levels", setting out the draft objectives. But, unfortunately, they contained nothing of great substance, other than stating that only on franchise services which enjoy significant market power--monopolies--could the franchise agreements limit price increases on fares. No such limits would apply on other lines.

To determine whether my right hon. Friend the Secretary of State could say anything more substantial about what he intended to do in relation to fares, I asked key questions about capping : at what level could the cap on fares be set and what would be the criteria for triggering the cap on fares where the franchisee had a monopoly? I also asked whether my right hon. Friend had any further information to supplement the thin information set out in the two paragraphs of the draft objectives to which I have referred. My hon. Friend the Minister replied :

"Further work remains to be done in developing the draft guidance that I provided to the Standing Committee in relation to fares regulation and other matters."--[ Official Report , 5 May 1993 ; Vol. 224, c. 158 .]

We are none the wiser about what is intended in the way of fare control.

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Mr. Mark Wolfson (Sevenoaks) : While I clearly welcome the fact that commuter lines into London are to be regarded as a monopoly, and will consequently be eligible for capping, does my right hon. Friend agree that there are many other cases all over the country in which, in railway terms, the franchisee will have a monopoly?

Sir John Stanley : I am grateful to my hon. Friend, who makes a significant point. In practice, it will be extremely difficult to ring- fence the capping principle on a geographical basis. I am sure that my right hon. Friend the Secretary of State and my hon. Friend the Minister will appreciate the force of what my hon. Friend the Member for Sevenoaks (Mr. Wolfson) has said.

On Second Reading, I said that I felt that I was being asked to sign a blank cheque on my constituents' cheque books for their travel-to-work costs--the second highest item of household expenditure in my constituency after food, runing at about £2,000 per year. The object of amendment No. 237 is to try to place an upper limit on the blank cheque by introducing the principle of reasonableness, inserting in clause 5 an additional statutory duty on the franchising director.

The House may find it interesting to look at the franchising director's existing statutory duties. In many ways, the first two duties are symptomatic of how the Bill is drafted, as they simply put clear obligations on the franchising director to do what the Secretary of State tells him. In other words, the franchising director will follow only the Secretary of State's objectives, guidelines and instructions. Indeed, he is a creature of the Secretary of State.

That is a perfectly reasonable principle, and I do not contest it. But that is where it ends--no further obligation whatever is placed on the franchising director, other than to do what the Secretary of State says. The purpose of the amendment is to introduce an additional statutory duty-- the requirement that the level of fares set should be reasonable to passengers.

I anticipate two possible questions that may be asked with regard to it. The first is whether it is technically and legally satisfactory to base a duty on the principle of reasonableness. I submit that there are ample precedents in statute law, and that it is a familiar legal concept. Obviously, in considering the amendment, I and those associated with it considered other options, such as whether there was a possible formula that could be adopted. We concluded that, given the multiplicity of lines, the different financial patterns and the different social requirements, there was no formula that could conceivably make sense and that therefore the criterion of reasonableness was the best one to adopt.

The second question that I anticipate is whether such an amendment is necessary : is the point that I am making covered elsewhere in the Bill? If my hon. Friend the Minister seeks to draw attention, for example, to clause 4(1)(a), which refers to the statutory duties of the Secretary of State and the regulator, there is a statutory duty "to protect the interests of users of railway services". That statutory duty is not sufficient to deal with the specific issue of fares--it is an extremely generalised duty.

Indeed, from some standpoints, one could well argue in favour of a substantial increase in fares, possibly in the interests of users of rail services in certain circumstances--for example, if a major investment programme had to

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take place. I do not believe that the statutory duty in clause 4 in any way provides an adequate answer to the question of protection in the area of fares.

My hon. Friend may seek to draw my attention to amendment No. 111. I appreciate that that amendment enables a franchising agreement to include provisions on fares, but their content is left wholly open and could amount to anything. Therefore, the specific legal point, the specific policy and the specific structure in law that is covered by my amendment is not in any way covered elsewhere in the legislation. If the amendment is accepted by the House--obviously, I hope that it will be--it will be the only specific wording in the legislation biting on fare levels.

The amendment could not be a wrecking amendment. It does not in any way seek to undermine the Government's proposals or stop franchising getting off the ground. It is based entirely on reasonableness. I put it to my right hon. and hon. Friends on the Front Bench that the only conceivable basis for failing to accept such an amendment is that they wish to keep open the option of fare levels becoming unreasonable. I assume and hope that that is not what they wish to do. The amendment is modest, sensible and necessary, and I commend it to the House.

Mr. Snape : As my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) said, we must pay tribute to the Government for one thing--they have accepted the principle of rolling stock leasing. Before the last general election, they were resolutely against rolling stock leasing. Indeed, during the campaign and for several months after it, the Minister of State said--I do not recall whether it was in the House or outside--that the Labour party's proposal on the leasing of rolling stock was impractical. It is a pleasure to see him, albeit from an odd angle, standing on his head at the Dispatch Box.

For some time, Labour Members have felt that the leasing of rolling stock was sensible because it would allow the newly formed leasing companies to raise private capital for new trains without having an impact on the external financing limits of the railway system. When we put that point to the Government, as we have done in the past few years, we were scorned, so we are delighted that yet another Labour party policy has finally been accepted by the Government. I listened with interest to the speech of the hon. Member for Southend, East (Sir T. Taylor), who has some reason for not being in his place at present. I appreciate the British Rail versus the SNCF argument. Generally, the hon. Gentleman is not overly keen on foreigners--he has made that plain in many debates in the House. He did not go so far as to imply that the employees of SNCF would trundle up and down through Fenchurch Street station and on to Southend wearing striped jerseys and berets and reeking of onions or garlic, but one got the general drift that he was not overly keen on the prospect of the French railway system intervening or operating trains in his part of the world.

When one looks at the comparative efficiency of British Rail and SNCF, the illogical nature of the legislation strikes one because the Government have admitted that BR's productivity and ability to run a railway system have recently improved dramatically and, indeed, by any

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benchmark exceed that of SNCF. However, not only will BR not be allowed to bid for railway franchises, but, in the event of a franchisee not renewing his franchise or going bust during the period of the franchise, British Rail will not be allowed to take over. Yet we have heard from Ministers that a less efficient, foreign-owned railway system will be allowed to take over. It is a rum form of Toryism. I always thought that Toryism was a fairly rum creed, but it gets rummer the more one looks at the proposals in the legislation. The right hon. Member for Tonbridge and Malling (Sir J. Stanley) understandably expressed concern about the likely impact of the proposals on fares in his constituency and on Network SouthEast. He is right to express that concern because it is the Government's intention to reduce and eventually eliminate subsidies to Network SouthEast commuter trains by 1995. It is no wonder that the right hon. Gentleman is concerned. He has a reputation of bebath of reality when it affects his constituency or--as subsidies are likely to be reduced or eliminated by 1995--his re-election prospects. If the subsidy to Network SouthEast has been abolished by that time, it will at least provide Conservative Members with a ready talking point on the doorsteps during the next election campaign.

It is acknowledged, not least in the latest report on rail privatisation by the consultants Steer Davies Gleave, that fares on Network SouthEast would have to rise by 37 per cent., presumably by 1995, if the Government's intention to withdraw the subsidy were realised. I understand the concern of the right hon. Member for Tonbridge and Malling and I appreciate the thinking and the feeling behind his amendment. I am not sure whether he has got the right person to whom to appeal for a ruling on the reasonableness or otherwise of the proposed fare rises, given the Government's intention and the duties of the franchising director to allocate routes depending on the quality and level of bids. Is the franchising director the right person to decide on the reasonableness of those fare increases? The right hon. Gentleman might consider the regulator a more suitable person.

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Not only is it politically reckless for the Government to present such proposals, but they will add considerably to the congestion on south- eastern roads and make it more difficult for Tory Members to be re-elected. That last point will not cause me to lose much sleep, although it is obviously disturbing to the right hon. Member for Tonbridge and Malling, whose amendment is in this group.

Is it logical to stand by while the increases illustrated by Steer Davies Gleave are implemented? Given the Government's intention to abolish the subsidies, perhaps the Minister of State will tell us whether he thinks that the amendment tabled by the right hon. Member for Tonbridge and Malling is reasonable.

The hon. Member for North Devon (Mr. Harvey) also said that the proposed legislation was nonsense. He mentioned the refusal to countenance the idea of the expert at running trains, British Rail, taking over a franchise. That is not fair to the management of BR. When I worked at BR, there were good and bad managers and the campaign of denigrating BR management has had an

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enormous impact on managerial morale. To suggest that people are effective as managers only if they mortgage their homes to put together a buy-out is as insulting as it is untrue. The Minister of State should look again at the whole issue of BR's managerial involvement. If the legislation is implemented with its provisions unscathed, there will be a further deterioration of managerial morale in the railways and the consequences of that will be borne by all our constituents.

The Minister should reply to the issues raised by the hon. Member for North Devon. I welcome the Minister's conversion to the principle of leasing rolling stock, but the amendments address many matters that are eminently unsatisfactory.

Mr. Paul Channon (Southend, West) : I apologise to the House for not being here at the beginning of the debate. The issues that my hon. Friend the Member for Southend, East (Sir T. Taylor) and I wish to raise are more apposite to the ammendment tabled by my right hon. Friend the Member for Tonbridge and Malling (Sir J. Stanley) than to some others.

My second apology is to my hon. Friend the Minister of State. It is never wise for ex-Secretaries of State to return to issues after they have been away from them for a few years. They are clearly out of date and probably have everything wrong. No doubt the Minister will politely correct me if I make some mistakes.

I am strongly in favour of the Bill and I hope that I am not the only hon. Member who takes that view. If I were not strongly in favour, I would certainly have landed the Government with a poisoned chalice. Perhaps I have done that. The Bill will bring long-term benefits to my constituents and to rail travellers in my constituency. [Interruption.] I intend to deal not with the macro side but with some of the small problems in my part of the world. I used to have to deal with the macro side and it is a great relief not to have to do that any more.

The point that some of my constituents raise with me is that, although they know perfectly well that over the past 50 years or so their service to London has left a great deal to be desired, they are alarmed by what is proposed in the Bill because they want to hold on to nurse for fear of getting something worse. I hope that my hon. Friend the Minister, when he considers the points raised by me and by my hon. Friend the Member for Southend, East, will consider how we can reassure them--because they are eminently reassurable. I believe that, before the franchises are awarded, it is important to consult those people in the local community who have strong views and some experience of how those rail services are or should be run. That is why I strongly believe that there should be some form of consultation or discussion with the local railway travellers' associations and perhaps with the consultative committees, so that those who are the leaders on this issue in my constituency--and, no doubt, many others--can be seized of the merits of the case. They will know why Mr. X has become one of the franchisers rather than Mr. Y and what criteria have led the Government or the franchising director to that decision. Such people should know some of the contents of the franchise--perhaps some things will be commercially confidential and will not be able to be revealed, but there will be some things that can easily be revealed. That would go a long way, at the beginning, towards reassuring people who are nervous about what might take place.

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My right hon. Friend the Member for Tonbridge and Malling raised in his powerful speech the most important issue of all--fares. I respect and believe the assurances given by my right hon. and hon. Friends, during the passage of the Bill and before, about what will happen to fares on commuter lines if the new system is adopted. I am not particularly worried about that because I know that my right hon. and hon. Friends will make sure that, on fares, nothing dreadful happens to my constituents. If something dreadful does happen, not only my seat but several hundred seats around London will be lost. The Government would be foolish to try it, so I am confident about that. It is not surprising that representatives of the commuters in my area, who do not have the experience or the pleasure of knowing my right hon. and hon. Friends as well as I do, are naturally nervous about the matter. My right hon. Friend the Member for Tonbridge and Malling outlined their anxieties, quite rightly, a few moments ago. I endorse everything that he said, and that may reassure one or two hon. Members who are nervous about some aspects of the Bill. I would ask my hon. Friend the Minister, when he winds up, to give careful consideration to trying to make sure that, when the changes take place, local people are fully consulted so that they know what they are in for and it does not come as a tremendous surprise. I think that they will find that they are very pleased with what will happen to them when the franchising takes place--that is the Government's intention and my intention, and I am sure it will be achieved--but they need to be helped, reassured and encouraged. I would echo the tributes paid to my hon. Friend the Minister. He has paid several visits to my constituency, ridden on the notorious misery line, and lived to tell the tale. He does not look too bad for having done so. I, too, have done so, and I can say that in recent months the line has got a great deal better. There is a considerable local problem, but I believe that franchising the service is likely to improve the position.

I ask my hon. Friend the Minister to give sympathetic consideration to the need to consult people, to take note of their views--in particular, the local railway travellers' association--and to give careful consideration to them before the franchises are awarded.

Mr. John Gunnell (Morley and Leeds, South) : Much of the press comment on the Bill recognises that it creates a new class of endangered species--that of the railways system and its dependants. Many of the amendments tabled for consideration seek to protect those dependants. The right hon. Member for Tonbridge and Malling (Sir J. Stanley) has moved an amendment which clearly seeks to protect passengers and the reference to the consultative system is again an attempt to protect passengers.

Other amendments will be moved which seek to protect freight users, lines from closure and employees--we have already had a debate about protecting employees. I suspect that the Government know well that many aspects of the railway system are seriously threatened by the Bill. The Minister commented on leased rolling stock, which is also affected by new clauses 13, 14 and 18, an issue that we must consider fully, and that has been raised several times in the debate. New clause 4, on the duty to furnish information, does not specify what information it is expected will be

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required. Let me suggest to the Minister the information that I think should be known to the franchising director. He should have a view on the historic costs of every service going out to franchise. That view should also be made available to the public. When services are to continue and support is offered by the franchising director, it is important to know what the cost of those services is now so that comparison may be drawn between the cost of the services run by British Rail and the anticipated cost under a franchising system. That information is necessary because the invitation to tender, which comes from the franchising director, must contain the best available information so that bidders can respond appropriately, bring forward cost-effective proposals and have an idea as to about where their bid should be pitched. We do not expect that there will be an excessive number of bidders. It is clear that there are likely to be few and only a few services may go out to franchise in the first instance. It is important that we set down and make public the costs and that they form part of the tendering process. It is also important that the franchising director has information on aspects of the track so that he is able to inform Railtrack of where new investment will be necessary. He will have to have much information that will need to be disclosed.

Amendment No. 237, to which the right hon. Member for Tonbridge and Malling spoke, concerns the fare levels that will be required and imposed. They will be affected by the amount that the franchising director is willing to pay for services. He will make a judgment about fares if he knows the current usage and costs of operating that line. He will be able to set the subsidy, which will enable bidders to draw a relationship between the passenger throughput and the possible rate of return on investment. It is important not only that his judgments are based on information, which he can obtain through new clause 4, but that that information is given to the public. Rolling stock was mentioned in the debate that preceded Second Reading and on Second Reading. It came up frequently during our debates. We recognise that the Bill threatens the railway engineering industry in a way that passengers, freight users and the environment are not threatened at this stage. They will be affected only when the Bill comes into operation and we find out whether it works. The railway engineering industry began to suffer as soon as the whiff of privatisation was in the air. That is made clear in the Select Committee report.

The report literally illustrates the point graphically. It sets out the levels of the order books of the railway engineering companies and suggests that by the end of 1995 there will be no orders on those books. The report clearly shows how long it has been since orders were placed by British Rail and others. The fall-off in business has been significant. When speaking to the Select Committee, Lord Prior said that £150 million over three years was nothing like sufficient and that unless there were more orders there would be no industry left in three years.

9.15 pm

I and other hon. Members who served on the Standing Committee acknowledge that the Minister is a good listener and that he responds constructively whenever possible. We welcome the fact that he has included in the new clause the ability for the franchising director to pass

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on rolling stock. That is a constructive move, because without it no one will want to acquire rolling stock for relatively short leases. The ability to pass on leased rolling stock is essential if the railway engineering industry is to get orders.

I want to ask some questions about the way in which the franchising director's ability to pass on rolling stock links with new clause 14, which deals with the ability to form finance companies, and new clause 18, which also refers to financing. The three hang together--

Mr. Deputy Speaker (Mr. Michael Morris) : Order. I hope that the hon. Gentleman will not use new clause 14 as a key element in his argument, but will wait until we reach that new clause. The same applies to new clause 18. The hon. Gentleman's argument must be centred on the new clause before the House.

Mr. Gunnell : I thought that this was the time to raise points about the rolling stock aspects because three other hon. Members, including the Minister, have done so. However, on the question of the financing of that stock I shall happily wait until we reach new clause 18 and make a brief contribution then.

Mr. Alan Williams (Swansea, West) : On a point of order, Mr. Deputy Speaker. I draw your attention to new clause 23, which refers to schemes relating to the transfer of assets. It is in that context that the Minister and other hon. Members referred to the transfer of rolling stock and that is why my hon. Friend referred to it.

Mr. Deputy Speaker : I am grateful to the right hon. Gentleman. I heard the other contributions to which he referred. The hon. Member for Morley and Leeds, South (Mr. Gunnell) specifically referred to new clauses 14 and 18 and said that he would develop his argument. I am saying that he must concentrate his remarks on the new clauses before us. If he wishes to speak later on new clauses 14 and 18, that is appropriate--but he cannot develop his argument on those new clauses now.

Mr. Gunnell : I shall rest my case at this stage by saying only that I recognise that the financial aspect of leased rolling stock is part of the franchising director's ability to pass on that stock. However, I must say that that is necessary as a protection for the railway engineering industry only because of the threats resulting from privatisation. I am not saying that the new clause is necessary in itself--it would be better to be without the Bill and then we would not need the new clause.

Mr. James Couchman (Gillingham) : My right hon. Friend the Member for Tonbridge and Malling (Sir J. Stanley) opened up the question of fares very elegantly, supported by my right hon. Friend the Member for Southend, West (Mr. Channon). The latter and I are in competition for representing the worst commuter line into London. Those from Essex maintain that the line from Southend is the worst ; we in Kent believe that the run from the Kent coast and the Kent link, along the north Kent coast, are worse than the Essex run. Either way, we compete for the worst rail link in Network SouthEast.

That is why I am on my feet this evening. Although I have not been deluged with letters about the Bill by my constituents, they have raised justifiable concerns about what may happen to them. They travel into London along a line of about the same length as the one from Tonbridge

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