House of Commons Hansard Debates for 2 Nov 1993

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would happen if the British Rail Board asks the same people--there is not a limitless supply of experienced managers-- to prepare bids on its behalf for the same franchises. It is an impossible conflict of loyalty and will put many managers off altogether. It is not clear at what point the franchise director will step in to rule that a board bid is acceptable or otherwise. Obviously, that comment was made before the Government's amendment had been seen, because our amendment makes clear the point at which the franchising director will step in. He will step in at an early stage to avoid unnecesary and fruitless bids and to clear up the uncertainties to which the source refers.

My third point is that it would be much more difficult to develop a healthy, competitive market in passenger railway services if British Rail were given unfettered discretion to bid for and operate franchises. We need to secure competition between franchisees which means avoiding market dominance by any one operator. That has been the clear purpose of our reforms, and one of the main benefits will come through that competition.

There are problems about transparency in bidding--problems of possibly unfair playing fields, cross subsidies and so on. The point is--I think that many people still misunderstand this with regard to our reforms--that there is no single big bang, no private flotation and no "Sid". Inevitably, the franchises will be granted over a period because the franchise director will be preparing different ones. We have indicated seven franchises that we regard as his priority.

In setting up the franchises, a track record of the separate business operating as a shadow franchise will have to be established so that bidders will be in a reasonable position to prepare bids. Inevitably, that means that not all bids will be happening at once--they will come through gradually. If British Rail is able to compete on each franchise at a different stage, that will increase the risk of unfair competition for bidding. Certainly, everyone who is preparing to bid will think that that is the case.

Mr. Nick Harvey (North Devon) : The Secretary of State says that a track record will have to be established on the service that is franchised. Can he clarify whether the managers who are running the shadow franchise and establishing the track record--the same team of managers--will be allowed to bid for the franchise? If so, is there not some incentive for them to ensure that the track record that they develop is as modest as possible so that they have the lowest possible figure for which to bid?

Mr. MacGregor : I do not think that that will be the case. If the hon. Gentleman is suggesting that managers will set out deliberately to run a poor service in order to show that they can improve the service, in that case they will prepare their bids, there will be other bids and they will be compared with the British Rail situation. If all the bids are better than the track record, clearly, the bid that is accepted will improve the situation.

In any case, everyone who is bidding--whether it is a

management-employee buy-out or someone else--will do so on the basis of the same known details of the track record. There will be no favourable position in that respect in terms of information for management-employee buy-outs as compared with any other bidder. Therefore, in that sense, it does not matter because everyone will have the same basis of comparison on the track record.

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Mr. Harvey : I am grateful to the Secretary of State for that. Is he telling us that the track record is the bid? Surely, at the point at which the bid is submitted, the track record is historic and the bid that is being made by the team is some sort of projection of the future. It may be that, having achieved a perfectly modest record in the period running up to the bid's being made, the team will none the less have a much more imaginative and adventurous business plan to submit. The projection of the future would be compared with bids from the private sector, and the figure that they submit would be based on that. However, the track record could be perfectly modest.

Mr. MacGregor : I thought that the hon. Gentleman would know this, because it has already been debated at great length. The track record of the shadow franchise will not be the bid--it will be the basis on which bids are prepared. Obviously, that will be important for every bidder. The bids will be considered by the franchising director--he will compare the different bids. If the bids are an improvement on the track record, clearly, that will be a factor that he will take into account. That is also something which we will welcome, because, in the competition for franchises, we will be looking for an improvement on the historic record.

I believe that the real issue is the other way round. I understand from discussions that we have had that a number of

management-employee buy-outs are aware of the potential for increasing revenue, making savings and improving efficiency. They will submit a bid that will be a good deal better than the track record for different reasons, not the reasons given by the hon. Member for North Devon (Mr. Harvey).

The Government have always said that if the franchising director is not satisfied with any of the bids, for whatever reason, and he feels that British Rail's track record while operating a shadow franchise gives better value for money, he will not grant any of the bids and British Rail will continue to operate as it has done. I hope that that makes the position clear.

Mr. Bob Cryer (Bradford, South) : It does not.

Mr. MacGregor : I know that the hon. Gentleman does not understand, but he has not been following it.

All the indications that we have had since the Lords amendment was incorporated in the Bill suggest that our concerns were and are justified. Potential bidders, including bidders for

management-employee buy-outs, have made it clear that they would be deterred from bidding if BR were given complete freedom to bid for franchises. I know that my hon. Friends agree with those concerns. The Government amendment in lieu of Lords amendment No. 31 resolves those difficulties. I pay particular tribute to my hon. Friend the Member for Ashford (Sir K. Speed). He has taken a close interest in these matters throughout and approached them in a constructive spirit, as have other of my hon. Friends. We have achieved a satisfactory outcome, which meets his concerns and those that the Government have always expressed. I regret that my hon. Friend cannot be here today owing to illness, but I hope that we will see him back shortly. The Government amendment preserves the wording of amendment No. 31, and the Government accept that BR should be eligible to be a franchisee. We are, of course,

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asking the House to reject amendment No. 31 and to replace it with the Government amendment. That is a technicality--it is a way of achieving the passage of the Government amendment--but the whole of the original measure from the House of Lords is preserved in the Government amendment.

The Government amendment puts certain confinements on BR's eligibility, and addresses the concerns that I have listed. It gives the franchising director a power to determine that BR should not be invited to bid for a particular franchise in certain circumstances. The franchising director may exclude BR from bidding, but only when he considers it desirable to do so in the interests of promoting management and employee bids or competitions for franchises, encouraging new entry into the industry or preventing or reducing market dominance in the provision of passenger railway services. The question whether to invite BR to bid will be left to the discretion of the franchising director. He will have responsibiliy for the entire franchising process, an important part of which involves having effective competition at the franchising stage wherever possible. It is right that he should be the person to decide whether to invite BR to bid for particular franchises.

Mr. Cryer : Why? It is crackers.

Mr. MacGregor : He will do so at the pre-qualification stage, before notices to tender go out and before people have to prepare bids. That is important in order to give the certainty that was asked for by the BR source, and to prevent unnecessary expenditure on the preparation of bids on a false basis.

Subsection (9) in amendment (a) makes it clear that the Secretary of State will not be able to give objectives, guidance and instructions to the franchising director in the exercise of his powers to determine that BR should not be invited to bid. I know that some people regard that as an important part of the amendment, because it guarantees the franchising director's independence. The amendment does not affect BR's role in operating passenger services until they are franchised. Should the franchising director decide not to accept any of the bids in response to his invitations to tender, BR will continue to operate that particular service. On Report on 25 May, I argued that the amendment from the other place was unnecessary because there was a fundamental basis on which other bids could be assessed--BR's operating track record. If none of the other bids was regarded as satisfactory because they did not give better value for money, BR would continue to operate that particular service.

Ms Glenda Jackson (Hampstead and Highgate) : In that instance, would the BR bid receive the same subsidy that a private franchisee would receive, or would BR still have to operate its services with its present subsidy?

Mr. MacGregor : That would be a matter for the franchising director. He would have to look at what subsidies were being bid for by the franchisees. The intention is that it would continue as before, but the issue of subsidy at that point would be a matter for the franchising director.

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Mr. Brian Wilson (Cunninghame, North) : The Secretary of State seemed to say that if British Rail became a franchisee, it would have the same length of franchise as any other franchisee, and the appearance of another interest in a particular service would not overtake the allocation of BR's franchise for the whole of the franchise period. Is that correct?

7.15 pm

Mr. MacGregor : That is more or less correct. It is a point which I will come on to later.

I am talking about a situation in which the franchising director decides that there are no viable bids, or no bids that give value for money. In such a situation, he would reject all the bids, and British Rail would continue to operate the service.

There is concern about the uncertainty that this might create for BR managers and staff, who will need to know where they stand in order to plan the operation of their services. For that reason, and having regard to BR's need to motivate its staff and to deliver services, I intend to include in the objectives, instructions and guidance that I will give to the franchising director a requirement that he should allow a reasonable period of time to elapse before initiating a new competition. It will be for the franchising director to decide how long that period should be. That point is covered in the second draft of the guidance to the franchn the guidance to the franchising director guidance on the assessment of bids from BR in cases in which he decides that BR should be allowed to bid. That is also contained in the draft guidance in the Library. The franchising director will have to ensure that BR's bids are assessed fairly, taking into account BR's position as the only public-sector body allowed to be a franchisee and the incumbent operator of the services to be franchised.

I will expect the franchising director to attach great weight to BR's record in providing the services in question, and to take account of the value of transferring risk from the public to the private sector. That will achieve the level playing field and the transparency.

The amendment giving the franchising director power to exclude BR from bidding will ensure that the interests of competition are properly safeguarded in the process of deciding who should be invited to bid for franchises. The guidance that I will give the franchising director will ensure that when BR does bid, its bids are properly and fairly assessed. That should reassure potential private-sector bidders that, despite BR's dominant position, there will be a level playing field.

As I have said, the amendment gives the franchising director a discretionary power to prevent BR from bidding when he considers that desirable for well-defined reasons. I cannot say how he will exercise that discretion, because the amendment also prevents me from giving him any guidance or exercising any power over his use of that discretion. In the terms of this amendment, there will be cases where BR will be given the opportunity to bid, although it will be for BR to decide whether to do so.

The Lords amendment makes a material change, even with the amendments that I propose. It will mean that a BR franchise will run for the period of the franchise, as distinct from the BR franchisee's being the residuary operator where there is no successful bidder. I hope that answers the

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hon. Gentleman's question. We intend to respond to the marketplace and the depth of the bids, and therefore the length of the franchises will differ.

Clause 106 provides that it shall be the principal objective of the Secretary of State, in exercising his powers in clauses 77 to 90 of the Bill, to secure

"as soon as is reasonably practicable the result that the function of providing railway services in Great Britain is performed by private sector operators."

That objective, as has been clear from the outset, applies to all railway services, including Railtrack, BR Railfreight, BR franchises and other BR- owned activities, including infrastructure companies, but the objective applies only as soon as is reasonably practicable and it is qualified by a wide range of other factors in subsection (2) to which the Secretary of State is required to have regard. Those include maintaining efficiency, economy and safety of operation in the provision of railway services and securing that any disposal takes place on favourable financial terms.

I could have said more about things that were said yesterday, but, to ensure that we get on with debating the amendment, which I know is of great interest to the House, I shall forbear from doing so. I shall simply conclude by saying that Lord Peyton's original amendment would have created chaos and confusion in BR and among management buy-outs and would have discouraged competition for franchises, which will secure better deals for passengers, taxpayers and employees. Our amendment strikes a proper balance between allowing BR to be a franchisee where that is appropriate, and ensuring that BR's dominant position does not prevent the development of private sector interest in franchised passenger services. It is workable in a way in which the House of Lords amendment in its present form would not be, and I commend the Government amendment to the House.

Mr. Wilson : It is a supreme irony for the Secretary of State for chaos and confusion, the architect of this massive, unwanted disruption of our railway network, to accuse Lord Peyton, that benign figure at the other end of the corridor, of seeking to cause chaos and confusion in British Rail with his amendment. It is an exact mirror image of the truth ; the Government are responsible for the chaos and the confusion that will be caused by the Bill.

This is a key series of amendments. The Lords amendment would give British Rail the right to bid. It started its life as the Adley amendment and it would be remiss not to recognise the late Member for Christchurch's view of it. Robert Adley said :

"It is a bit odd to say that the only people who will not be allowed to bid to run the trains is the only organisation in Britain that actually has any experience of running trains--namely, British Rail."

That was true when Robert Adley said it, and it is true now. The absurdity that he highlighted was gross then, it is gross now, and nothing that the Secretary of State has said tonight erodes that fundamental absurdity. What has been stitched up as a deal with Conservative Back Benchers is the Government's internal affair, but the rest of the House and the country know that it is not a compromise but a buy-off, and that it is a buy-off for an extremely low price.

Until last week, there seemed to be reasonably widespread agreement throughout the Chamber on the principle that Robert Adley enunciated, and which had carried on life as the Peyton-Marsh amendment. That

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agreement has now collapsed due to the so- called Tory rebels' undignified retreat, which was as predictable as it is risible. We are left with a contradiction. Yes, British Rail will be allowed to bid, but only if the franchise director can find no one else to bid against it. If he can, British Rail will be sent off into undignified retreat as the operator of last resort.

That is not fair competition ; it is a rigged perversion of competition. It is deeply contemptuous of British Rail, its managers and its work force. British Rail will be left as the provider of last resort when no one else wants to run a service. The Minister, when it suits him, admits that, for a long time to come, a large part of the British rail network will remain in the hands of British Rail, but it will be in the hands of British Rail under the conditions which the amendment to the amendment seeks to impose, in which British Rail has been categorised as the provider of last resort, in the full knowledge that the opinion of the Government is that, if it can be got rid of, it will be got rid of.

I recognise a small advance in that. I have no doubt that, when the Government set out on this course, they intended to abolish British Rail altogether and to leave it running no trains at all. They have been on a collision course with reality because of the modicum of private sector interest that exists and also the massive cost in subsidy, which we now know a little more about, that will be needed if private operators are to be interested. They recognise now that British Rail will not go away and that it will still have a usefulness, but in a role which no other party and no other Government would dream of according the state railway company. We should be investing in and developing British Rail so that it gives us a railway to be proud of, integrated within the public sector, as exists in other continental countries.

What the Secretary of State is doing in this amendment is deeply contemptuous not only of British Rail but also of the British taxpayer. The Secretary of State is saying that, even if British Rail is the most effective potential bidder--in fact, especially if British Rail is the most effective potential bidder against a private interest--it will be excluded from competing in order to clear the way for that private bidder. There will be no competition.

Mr. MacGregor indicated dissent.

Mr. Wilson : The Secretary of State shakes his head, but it is my understanding that, where that is likely to exist, British Rail will be disqualified from bidding. Irrespective of how little subsidy British Rail seeks to operate a particular franchise, if a private operator who might be asking for a great deal more subsidy is available, British Rail will be excluded and the money will go to the private operator. That is why we begin to realise that a huge increase in subsidy will be required to hold the network together. The figures that we discussed the other day did not take account of train operators' profit. They envisaged the daft circular movement of everyone paying everyone else profit--the economic charges, plus 8 per cent. return. The figures did not take account of the train operators' profits. It is at that point, when the private operators are brought into that circle, if they ever exist, that the cost of subsidy,

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if the existing network is to be maintained, will go through the roof, even beyond the £2 billion a year which is being discussed now.

If British Rail were allowed to bid for every franchise, and came in as the lowest tenderer in every franchise, the country would ask why British Rail should not operate every franchise, because in aggregate the cost to the taxpayer would be massively less than the alternative, which is to fragment the railway, to cosset the private sector and, in each of those franchises where there is an interest, to pay the operators more in order to operate the services. The Secretary of State, in defence of that point, argues against the concept of cross-subsidy. Cross-subsidy is a good idea ; we owe an awful lot of our public services to it. In arguing against cross-subsidy in order to disqualify British Rail from bidding, the Secretary of State gives the show away. If British Rail were allowed to compete for every one of those 25 train operating companies, and if it were able to win every one of those franchises, obviously it would not be on the basis of cross- subsidy because British Rail would have had to make the appropriate bid in each and every case. Cross-subsidy enters the argument only when one is dealing with two or three of those franchises, not when one is dealing with all of them.

If there were any logic in what the Secretary of State is doing, and if there were any interest in giving the taxpayer the best deal, it would be put to the test : British Rail would be allowed to bid for every one of those franchises. The Secretary of State understands and fears above all that British Rail would probably win all, or nearly all, the franchises, which would be the best deal for the British taxpayer.

Mr. MacGregor : The hon. Gentleman totally ignores two points : first, as I made clear, the franchises will not all go out at one and the same time, but will be staggered substantially ; and secondly that the franchising director will know the operating track record of British Rail during the period beforehand as a separate business--the shadow franchise, in other words. He will therefore have a benchmark, a comparison, with which to compare the bids, and if he does not think that he is getting value for money for the bids, he will not grant them.

Mr. Wilson : The point about staggering is irrelevant ; in fact, it supports my case, because, if the Government's policy is pursued, ultimately all the lines would go out to franchise. Eventually, cross- subsidising would catch up with British Rail, because it would not be able to bid effectively for the later franchises. It is not true--British Rail would win the franchises not by cross-subsidising but because, as Robert Adley said, it is the only organisation in Britain with any experience of running the railways.

I am sorry, but what was the Secretary of State's second point? 7.30 pm

Mr. MacGregor : The franchising director will always know British Rail's track record of operating as the shadow franchise. He will be able to make that comparison, and, if he does not think that the bidders offer value for money, he will not award them the contract, so the shadow franchise will be converted into British Rail operating the franchise.

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Incidentally, the hon. Gentleman is quite wrong about the £2 billion, and therefore about subsidies. He has completely misunderstood the basis for that figure. It comes from a report which is only a working document and which I have never seen. There are many models, and it is ridiculous to place such weight on that one. His argument about subsidy and value for money is undermined by the very process that the franchising director will go through.

Mr. Wilson : I certainly understood, from his reaction on television, that the Secretary of State had never seen the document in question. It was produced at the highest level by his officials and spells out the cost of subsidy during the next year. I have no doubt that, now that the document has come out, some formula will be found for disguising the figures, but essentially it spells out in great detail that more taxpayers' money will be needed in the system to make the thing work. That is the lesson to be learned from the document, and it is also common sense if anyone looks at this legislation.

Mr. MacGregor : Let me make it quite clear that I did not know about the report when I was confronted with it on television on Sunday, because there are a large number of documents from working groups at various levels. Naturally, one asks for different models of the way in which one can achieve a more commercial basis for the system. I think that that report was the 79th document from that working group. The hon. Gentleman is creating a great myth on the basis of very little, as he so often does.

Mr. Wilson : Frankly, if I were the Secretary of State I would think that some questions needed to be asked when my Department produced a document that concluded that

"the central Government grant requirement would total about £2 billion in 1994-95, assuming an 8 per cent. return for Railtrack", if the officials had got it wrong to the nearest billion, irrespective of the level at which the report was prepared. If he likes, he can tell us the level of the document and whether that statement is wrong. It is not my statement, however--it comes from his Department, which says that it will cost £2 billion next year to make this show operate, without running a single extra train or carrying a single extra passenger.

Mr. MacGregor : Will the hon. Gentleman give way?

Mr. Wilson : Yes, we will bow to experience.

Mr. MacGregor : The hon. Gentleman has completely misunderstood. If I remember correctly, I think that the report says, "by way of illustration". It is a model. The fact is that we are studying various models. That document was illustrating one way in which certain factors, which have all yet to be decided, could be worked through in the system. It is wrong to make any deductions from it about the level of subsidy next year.

The hon. Gentleman, among others, has made all sorts of suggestions on previous occasions about Network SouthEast fare increases. I have always said that we should wait until the announcement. I suggest that the hon. Gentleman would be well advised to do so, rather than building his position on a working document when many other such documents are being worked through.

Mr. Wilson : We need not prolong this argument. As the Secretary of State says, it will all come out in the wash. I am surprised, however, that he should build his case on fare increases. What sort of Government do laps of honour

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when fare increases are restricted to four or five times the rate of inflation, after Government intervention to hold them down? I am talking about Network SouthEast and the 8 or 9 per cent. increase in the travelcard. I do not regard that as a great triumph, and that increase was after intervention. Suppressing such increases would have to be paid for one way or another. British Rail has been left with that problem.

We have wandered off the point slightly. Let me return to the subject of ghost bids, to which I think the Secretary of State referred. We are invited to believe that the franchise director will consider British Rail's operations, once the vast superstructure for privatisation has been set up, and will work out what it costs British Rail to run each franchise area. He will then say that, if the private sector cannot do it for less, there will not even be a competition and British Rail will carry on. Is that probable ? Is some guy appointed by the Secretary of State going to study BR's costs and call the whole thing off because, having looked at it objectively, he has decided that there is no way that the private sector could do it more cheaply ? I do not believe it. The Secretary of State does not believe it. It is a total fiction to parade to the House.

The Secretary of State's political direction to the franchise director will be that he should get some franchises going this side of the next general election, but only the safe ones--the ones at which money can be thrown and which will cause the Government no political embarrassment. I do not think that they exist ; we are beginning to see that from the Gatwick express, which is supposed to be the easiest of them all.

Political direction will occur at every stage. The franchise director will be told what to franchise, to cut out British Rail and to skew subsidy in the early years towards private operation, to give the Secretary of State the sort of political cover that he obviously so much requires.

I know that many of my hon. Friends want to speak and I think that Conservative Members have some explaining to do, so I do not want to take too long on the subject, but the myth of management buy-out must be challenged whenever it occurs. The Secretary of State may be a magician but he is not entitled to set himself up as a ventriloquist, to speak for people who are not allowed to speak for themselves, and to misrepresent them. That is a disgrace.

I do not know what precise proportion of BR's management are interested in buy-outs, but I know that, according to the only survey of opinion undertaken, 92 per cent. of senior railway managers are opposed to rail privatisation. It may be a little more, or a little less, but there is not one shred of evidence from which the Secretary of State can adduce, or even try to adduce, that a majority or even a substantial body of railway managers are positively in favour of rail privatisation and want to be involved in buy-outs.

Ninety-two per cent. of rail managers replying to the survey were opposed to privatisation ; 77 per cent. were in favour of British Rail retaining the ability to bid for franchises. Seventy-seven per cent. of managers are still in favour of the very amendment that we are discussing. Tory Back Benchers--to whom the railway managers appealed--will betray them on that amendment.

Let it not be said that the amendment has been tabled in the name of railway managers, because it is not true. The Government are looking for a minority of railway managers who, from zeal or fears for their jobs and

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prospects, will become involved in the buy- outs. It is a disgrace to misrepresent railway managers by suggesting that they are behind the proposal. It astonishes me. No, it does not astonish me, as nothing that this lot does can astonish me. In the light of the figures, the Secretary of State glibly pretends that Government proposals are intended to support railway managers.

Railway managers may be the front men--we discussed last night how they might be used by private sector interests as a way in. A handful of managers may be involved, but how long will they remain involved? I know that the Secretary of State and the Minister attend conferences on rail privatisation, as I do--a great new industry has been created. I am sure that they are as familiar as I am with the advice given by financial interests to potential management buy-outs. I am sure that they are also as familiar with the term "exiting", which is used at such conferences, when railway managers are told, "Yes, get in there, make your money and then exit within three to five years. Sell on to the full private sector." That is the strategy urged on railway managers by the financial backers and the interested parties who will eventually take over those companies.

The idea that there is widespread enthusiasm among railway managers to make it their life's work to run private railways is false. The Minister knows what happened in other industries. Let us consider what happened to the bus industry where buy-outs occurred--within a few years, financial pressures and the anxiety to make a fast buck led to companies being sold on. I make no distinction between management buy-outs and full privatisation, because they are ultimately exactly the same. The only substantial difference in most cases is that a small number of pockets are well lined. That provides a heavy incentive for managers to become involved initially. The extraordinary tribute to managers' commitment to the public railway can be seen in the figures. In spite of the bribe, 91 per cent. of railway managers are opposed to the suggestion. The Secretary of State said that there was

"not a limitless supply of experienced managers".

He has got something right. Of course there is not a limitless supply ; in fact, there is a distinctly limited supply.

What will happen while the wonderful management buy-outs bids are being prepared? We understand that managers involved in the bids will have to separate themselves from British Rail while the bids are put together for a period of six months, or perhaps even 12 months-- [Interruption.] The Minister can correct me if I am wrong.

Mr. Freeman : Later.

Mr. Wilson : Who will run the railway from the moment that the bids are put together? If the bids do not succeed--there is no guarantee that they will--what will happen to the railway managers who have separated themselves from British Rail in order to put their bids together? Will they return to oust the people who have run the public railway while they have been away putting together their bids? The scheme is a recipe for conflict and division, and will sap morale. Some people will be seen to be trying to feather their own nests, while others will be left with the job of running the public railway. That is what the Government are doing to the railways, and it is already having a huge effect on the morale of those who work in that industry.

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The Secretary of State is right to say that there is not a limitless supply of experienced managers. Where will those private interested parties, who are supposed to be waiting in the wings, find the supply of railway managers to run the industry? When bus companies and other interests enter the market, they may want to recruit from the existing pool of railway managers, but at that stage not even the Secretary of State will be able to dragoon railway managers to work for them. At present, there is a large haemorrhage of experienced railway managers because they despise what is being done to their industry. That haemorrhage will increase.

The Secretary of State must bear in mind the fact that there will not be a limitless supply of experienced managers. He will leave us with a railway from which many of the most experienced people have gone. The inevitable corollary of that is that the running of the railway will be left in the hands of inexperienced people, which will have serious implications.

I am curious about the line that market dominance will exclude British Rail from bids. The Government are in the process of setting up private monopolies throughout the country. No matter which company wins the franchise, it will have a monopoly--whether it be British Rail or any other company. If only one operator runs a

franchise--which will be the reality for a long time, even under the Government's scheme--that operator has market dominance. To say that British Rail cannot bid because to do so would give it market dominance is nonsense. If the Government have an explanation, I will be interested to hear it.

7.45 pm

I question whether fixing the scheme against British Rail and talking up management buy-outs is legal under European law. That issue was authoritatively raised in the House of Lords by Lord Clinton-Davis. In our contacts with the European Commission, we have been advised that it would certainly want to consider that issue. The notion that competition can be twisted to push one potential operator and discount another is ridiculous. Perhaps that could be done in the good old days of market rigging, but there is now European law to be taken into account. The words of Lord Clinton-Davis in the House of Lords will be actively pursued by the Labour party, which wants answers to various questions.

The subject should be of interest to my friends and colleagues from Ulster, who were present earlier. The Government may try to tell them that the Bill contains nothing relevant to Northern Ireland. We know that emissaries were sent to try to buy their votes a few weeks ago. There is a consultants' report on the future of Northern Ireland Railways. Despite several parliamentary questions, the Government have refused to publish that report. If they go ahead with the Bill, there is every reason to believe that Northern Ireland Railways would be next in line, as well as any other bits and pieces of railways around the country. The precedent of not allowing the operator to bid would presumably apply in each of those cases. The implications for Northern Ireland do not have to be spelled out.

The scheme is not a compromise ; it is not an effort to satisfy the reasonable demand to give British Rail the right to bid. It is a fix against British Rail and cossets the private sector, which may turn out not to exist. There are minimal signs of genuine private sector interest. British Rail will

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continue to operate the great majority of services in this country. After a change of Government, British Rail will once again operate all the services in this country. In the meantime, what damage will be done to the morale and fabric of British Rail? The Government's performance over the issue, particularly the amendment, has been tawdry. They may have bought off the Tory rebels, but not opinion in the country.

Mr. Tim Rathbone (Lewes) : If the speech of the hon. Member for Cunninghame, North (Mr. Wilson) was meant to be a short speech that left lots of time for colleagues on both sides of the House to make their own contributions, I am glad that we were not blessed with a long speech from the hon. Member.

I am extremely glad to have caught your eye, Mr. Deputy Speaker, as it gives me the opportunity to put my oar into the debate not just only on my behalf, but on behalf of my hon. Friend the Member for Ashford (Sir K. Speed) who, as my right hon. Friend the Secretary of State said earlier, is unfortunately extremely unwell and unable to be with us today.

My hon. Friend the Member for Ashford and I are grateful to my right hon. Friend for seeking to address the concerns that a number of us have expressed. Our worries relate to ensuring the fundamental direction of the Bill and what it is meant to do. The Bill is intended to improve the service offered to customers by railways and to offer value for money both to passengers and to taxpayers. There has been much press and public comment on the subject of Lords amendment No. 31, the so-called Peyton amendment, to allow the British Railways Board or a wholly owned subsidiary of the board to become a franchisee. Since the amendment of Lord Peyton--no shrinking violet--was accepted in another place, a number of colleagues and I have argued in favour of the amendment to improve the

denationalisation Bill.

I am delighted and grateful that my right hon. Friends the Secretary of State and the Minister for Public Transport have accepted that principle and tabled a Government amendment on the issue, in the same positive way as they have reacted to other suggestions that we have made over recent weeks and months. As my right hon. Friend the Secretary of State said earlier, it is essential to have a level playing field for all potential franchisees, be they from the private sector, management-employee buy-outs or the British Railways Board. British Rail managers with whom I and my hon. Friends have spoken, including those employees who wish to mount management -employee buy-outs, have stressed that they want only a level playing field, not a built-in advantage. They merely want to be able to compete for the franchise equally and fairly. They did not want the Peyton amendment overturned.

I understand the managers' concern. I believe that anyone with any business experience would understand their concern, because railway franchises will inevitably be a risky business. The companies will employ staff and have contracts perhaps for only five or seven years, although I was pleased to hear my right hon. Friend state on television last weekend that the contracts could go up to 15 years or even more.

The companies will not own many assets. The trains will be leased and the track, signalling and stations will be owned by Railtrack or by franchisees for those stations. They will avoid much capital debt, but will lack also the

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