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not know of any yet--that might seek partnerships with BR teams of managers. All those possibilities do not look likely to become realities.

We have to ask the Government to consider several questions. First, why will there be no genuine competitive tendering in this privatisation? My hon. Friend the Member for Streatham (Mr. Hill) said that the Government have permitted other in-house groups within the public sector to set up and compete against the private sector. I would go further : I would say that the Government have encouraged that. We have seen many examples of groups that have offered services first within the public sector and then, as a result of their experience there, have put in bids and transferred to the private sector.

The Government would have benefited if they had allowed British Rail to compete. The hon. Member for Hampshire, North-West (Sir D. Mitchell) said that he did not think that BR managers were all that good at some of the aspects of business that are necessary in a management buy-out. He said that they were not good at giving the sort of financial information that would be necessary in a bid. In that case, it would be better to allow BR to develop such expertise than simply to cut its managers free now.

We have to ask about the transfer of risk, a point that I mentioned last night. The Minister said that he did not regard the whole of the private sector bid as being covered by the transfer of risk. If BR is providing a service at £10 million a year and a private sector bidder offers to provide the service at £15 million a year, will the transfer of risk be more than the £5 million a year to make that private sector bid more economical?

8.45 pm

We have to be suspicious of the Government's amendment, because it contains no referrence to costs, as the hon. Member for Lewes (Mr. Rathbone) said. Given that the amendments are designed to transfer services to the private sector, why is there no clause to ensure that the transfer does not incur significant additional costs? Why is that not a limiting factor and why have the Government not put economy at the forefront of their amendments? In every other respect, it has been clear that the franchising director has to take maximum account of cost and the economy ; but not in this instance. That is why the Minister, in dealing with PTAs--he has been willing to talk to them throughout the passage of the Bill--has said that the section 20 grants will have to rise by 50 per cent. to cover the increased costs of services. Those increased costs are brought about by the change in the Bill. The Minister cannot avoid answering that point.

Mr. Gary Waller (Keighley) : Any lingering doubts that I might have had about the Government's amendments would have been blown away by the lack of vision shown by Opposition Members. Time and again, they have ignored the key point, which was emphasised by my right hon. Friend the Secretary of State, that even where BR does not have an opportunity to make a formal bid, the franchise director will be precluded from awarding a franchise to an operator whose potential does not match the track record of BR.

The draft objectives for the franchising director state clearly, on the first page, that he must seek to protect the interests of passengers. It would be nonsense in those terms to award a franchise to an operator whose potential service would be worse. We have heard the misleading claim that

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BR is a provider of last resort. The suggestion is that BR will be left with services only if no other bids are submitted for them. That is a misunderstanding of the purposes of the Bill. Sadly, that misunderstanding is spread throughout the country. We have to explain the measure better. Unreal fears have been promoted in recent months on the basis of misleading information deliberately provided from certain sources.

It seems to me that rail users have a good two-way bet. The BR shadow franchises will inevitably have to respond to commercial pressures and, whether BR or a management and employee buy-out eventually runs the service, it will be a better service--at least it will be no worse--because the franchise director will not award a franchise to someone who will provide a worse service.

Another myth is that BR will be left running a rump railway after a bout of cherry picking. Anyone who believes that clearly has not read the Bill or the "Draft objectives for the franchising director", the first page of which includes as a principal objective

"through payment of support to the British Railways Board and its wholly owned subsidiaries and to franchisees, to secure an improved overall service for passengers."

I am convinced that, for a long time, services will continue to require taxpayers' support. That cannot be denied. Indeed, it is bound to be the case, as it is in all countries with railway services.

I hope that the franchising process will bring the greatest improvement to those services that need it. For various reasons, the service currently provided by BR is patchy throughout the country. We all know that certain lines desperately need improvement and the franchising process is the best way to ensure that it is directed to those services.

I welcome the fact that the Government have gone not for a big bang but a gradualist approach. As time goes by, the Bill's benefits will become clearer and clearer.

Ms Glenda Jackson : Yesterday, my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) referred to another amendment in the Bill as "Alice in Wonderland". Surely this amendment brings us to the Mad Hatter's tea party. I clearly recall my hon. Friend the Member for Wrexham (Dr. Marek) tabling an amendment in Committee urging the Government to allow BR to bid for franchises. The Government's response then was a categorical no. For a variety of reasons, BR was not to be allowed to bid for franchises in the bright new world of privatised railways.

What has happened in such a comparatively short time to change the Government's attitude to the idea of British Rail bidding for franchises? Could it conceivably be that the private sector has shown no interest whatever in taking on the British Rail network? That is probably a stronger reason than the much-vaunted Conservative Back-Bench revolt. Even someone as comparatively new to the House as I am knows that Conservative Back Benchers tend to talk a good fight, but inevitably fail to deliver the knock-out punch.

The argument of the hon. Member for Hampshire, North-West (Sir D. Mitchell), that BR should not be allowed to bid because it was over- qualified, was absurd. I should not like to travel on a rail network run by amateurs, which is, in essence, what we are talking about.

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He argued that it is unfair because BR has a bottomless pit of public money with which to provide an improved service. We have seen in the past few weeks that that is patently untrue. The Government have savagely reduced public service obligation and BR subsidies. I asked the Secretary of State this afternoon whether the subsidy earmarked for private operators when they bid for franchises would be given to the BR service if a private franchiser failed to win a franchise. BR will be expected, come hell or high water, to keep the trains running on our national network. As usual, the Secretary of State neglected to answer.

How can the Government seriously expect to improve the use of the rail network, attracting more passengers on to it and keeping freight off the roads? As one of my hon. Friends said yesterday, when will the Government give up their love affair with the juggernaut? How can the proposed basis for introducing this ridiculous Bill be achieved if those now running the rail network, who will be expected to get out of trouble privatised franchise operators who significantly fail to deliver the service? How are we to expand the use of our networks and attract more people onto them when the Government consistently say that BR is a fail-safe device, is not good enough to bid for new franchises, and lacks the imagination to produce better services?

I spent an entire day with the management and work force of the part of BR that runs through my constituency--the north London line. A more dedicated group of people it would be extremely hard to find. They have weathered and worn the Government's chopping and changing and their inability to define what they mean by a public network service, short or long-term franchises, or plans for British Rail. Yet the members of that management and work force are still dedicated to the idea of a public network system. They are desperate to improve their stations and only too anxious to improve their services. They have a welter of imaginative ideas which they and I believe would attract more people back to that stretch of the railway. They have wonderful ideas for integrating that piece of railway into the much wider network.

Those who significantly failed to link this country by means of the channel tunnel link should listen to those members of the BR management. But they are not interested in the idea of breaking up the existing network in which public money will do little more than line the pockets of private investors who, as we have heard time and again in the House, lack any experience in running a rail network. Only one group of people knows how to run a network. It could run it infinitely better if only the Government would acknowledge that a railway is a national resource and infrastructure that should be funded by public and private combinations, not split up in this absurd way.

Mr. Wilson : May I ask the Minister a specific point on ghost bids? I understand that there has been a change in Government thinking and that track and rolling stock costs will not now be distributed by the franchise director to specific franchises but, instead, the franchise director will pay a lump sum to Railtrack and the leasing companies. Will the Minister confirm whether that is correct? If so, it represents a fundamental change in the Bill, virtually abolishing the concept of transparency and the attribution of costs to particular routes within the franchise. It also

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makes it impossible to make meaningful comparisons between BR's current performance and the bids being made. Has that major change in Government thinking, as yet unannounced, taken place?

We have had a full debate for the past two hours. I am pleased to see that, until the closing speeches, the allocation of speeches has gone back and forth across the Chamber.

Despite that widespread participation, the Government have truncated the debate on the spurious ground that there was procrastination in yesterday's debate. The debate would have been even better if it could have continued last night and we had been allowed more time. The Government's assertion that Opposition Members were speaking to no purpose has been discredited in the past couple of hours.

The Government's arguments on the amendments have been similarly discredited. Conservative arguments were summed up by my hon. Friend the Member for Hampstead and Highgate (Ms Jackson), who said that they asserted that British Rail was to be disqualified from bidding because it over- qualified. People who use the railways want a safe and efficient system that will cost the taxpayer as little as possible. They would prefer over- qualified people to those who are under-qualified, who are brought into the network not to improve it but to practise the dogma and prejudice that underlies the legislation.

As the hon. Member for North Devon (Mr. Harvey) said, the grounds on which the franchising director, who will be a creature of Government, will be able to rule out British Rail are part of a catch-all clause. BR will be left as a last resort provider. We shall oppose that at every stage, and shall draw attention to what is being done, to the discrimination against British Rail and to the disadvantage that will be imposed on the taxpayer. We shall continue to oppose the amendments.

9 pm

Mr. Freeman : I shall try to be as succinct as possible, but I am sure that the House would want me to answer all points properly. I can tell the hon. Member for Cunninghame, North (Mr. Wilson) that, for the first round of franchises, we expect that the franchising director will reach agreement with Rail track on the costs of track access for all franchises.

After that, the franchising director will ask for bids for subsidy for those lines that he proposes to franchise. Therefore, the bids will reflect not only the cost of train operation but the cost of access to the track. Of course, open access operators and the freight industry will bid directly to Railtrack. As I have said, we expect Railtrack as from yesterday to negotiate terms for access to the track. Rolling stock is a matter for the rolling stock companies. The hon. Member for Streatham (Mr. Hill) asked about the treaty of Rome. Obviously, the franchising director must exercise his discretion under the amendment in line with our obligations under that treaty. The amendment does not require the franchising director to take any action in breach of those obligations.

The hon. Members for North Devon (Mr. Harvey) and for Morley and Leeds, South (Mr. Gunnell) spoke about the £2 billion. My right hon. Friend and I have explained that, but I shall try to do so again. This is a model. It does not imply any additional funds for the railway system--that is to say, Railtrack, British Rail and the franchising

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director. It is simply one attempt of many to estimate the external financing limit of one part of the railway system, the franchising director. That is all in the public sector. I am sure that my right hon. Friend will look at many more possible solutions as to how a given sum of public money can be split between the external financing limits of those three public sector bodies.

It is not true that I have spoken about 50 per cent. The figure represents the increase in track costs to the passenger transport authorities, and I have no idea what the final increase will be. We shall provide a specific grant to the PTAs to cover the increase in costs in 1994-95. We have no desire to interfere with the level of service, and there is no reason to do so.

The Secretary of State and I are grateful to my hon. Friends the Members for Hampshire, North-West (Sir D. Mitchell) and for Worcester (Mr. Luff). I appreciate their support. They also want to improve the private sector's contribution to the railway, and that can be done by permitting additional investment and greater innovation. That is not a criticism of BR managers or employees. Because of the nature of a public sector monopoly, those two benefits are not properly reaped. The issue is how that is to be done.

The hon. Member for Cunninghame, North asked whether British Rail would bid. I confirm that our expectation, intention and belief is that it will bid competitively in certain circumstances. That is the purpose of my right hon. Friend's amendments. However, it will not be invited to bid in specific cases. The franchising director will decide. That is where the issue of promoting an interest in buy-outs by management-employees arises. That will encourage competition and prevent dominance. I shall try to define precisely the last of those.

There is evidence that British Rail management are seeking to prepare bids. We welcome that. I have visited many BR managers and I know that they are interested in the 25 franchises in the offing. Some of that interest will manifest itself next year and some in years to come.

The hon. Member for Morley and Leeds, South asked about value for money. The franchising director's budget is cash-limited, and he must use the money efficiently and economically. Therefore, when he compares private sector bids with BR's historic costs and makes his decision, taking account of risk transfer to accept a higher subsidy bid in the early years, he must initially justify that decision to the Public Accounts Committee. Of course, his judgments are subject to judicial review. The figures cited by the hon. Gentleman are way over the top. There may well be some differences, but they will have to be justified.

My hon. Friend the Member for Lewes (Mr. Rathbone) asked seven questions, and I shall seek to answer them as succinctly as I can. I am sorry that my hon. Friend the Member for Ashford (Sir K. Speed) is not here. Some of the questions that my hon. Friend the Member for Keighley (Mr. Waller) asked overlapped with the seven from my hon. Friend the Member for Lewes, and I hope that I have them correctly. First, we did not manage to table the amendments to deal with the ability of the railway museum to acquire artefacts from the private sector. I will reply to the director of the railway museum. I give an assurance that I will have a meeting with him. It may be that we will be able to achieve the same objectives, but not v

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not an evasion at all ; we intend that the museum should obtain artefacts from both the private and public sector. I do not understand what the mirth is about.

Secondly, my hon. Friend asked whether the franchising director would operate on a level playing field. It is important that the franchising director obtains value for money. As I have already explained to the House, his judgments will have to be explained in due course to the Public Accounts Committee. There is certainly no requirement upon him to exercise that discretion in any particular fashion. He will enable BR to bid in certain cases, and he must explain any actions he takes in relation to the private sector. Thirdly, my hon. Friend asked what was meant by dominance. It does not mean an absolute bar on BR bids from the beginning. My right hon. Friend and I certainly do not interpret dominance to mean that no BR bid should be allowed until it is down to 25 per cent. of all rail services in Great Britain : that is clearly absurd. Judgment will have to be used regionally and nationally, because we want to encourage private sector participation.

Fourthly, my hon. Friend asked about the publication of decisions. My hon. Friend will know that clause 67 of the print of the Bill dated 27 May states that the franchising director must publish and annual report which must be laid before the House by my right hon. Friend. We believe that is the right way to explain the decisions that have been taken.

Mr. Rathbone : It is absolutely essential that those decisions are explained in the annual report. In order to enable a judicial challenge to be made, it is unreasonable to expect a potential challenger to postpone making that challenge until the annual report becomes available, so it is important that the franchising director publishes his reasons before the annual report.

Mr. Freeman : I understand that. I am sure that the franchising director will be making announcements. I will reflect on what my hon. Friend has said, but I can give him no assurance at this stage that the franchising director will go beyond giving a account of this activities in the annual report. I understand what my hon. Friend is arguing ; perhaps it is sensible to review what statement is made by the franchising director as and when he makes each decision. It is a perfectly reasonable point, and my right hon. Friend and I will reflect on it.

I was asked what was a reasonable period for BR to operate as a matter of last resort and continue to run services if it does not participate in the franchise award. We have deliberately not tried to define that, because it is not possible to do so. My right hon. Friend and I will reconsider the draft objectives which have been tabled for consideration by the House and reflect on how the language can be improved, but I do not hold out any hope that that period should specifically match the franchise period that the franchise director had in mind to offer if BR was not bidding.

I entirely accept my hon. Friend's point that we must ensure that the morale of BR does not deteriorate, and that management should be given some certaintly in continuing to run services.

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Sixthly, my hon. Friend asked whether there were other means by which my right hon. Friend the Secretary of State can direct the franchising director in terms of accepting or rejecting British Rail as a bidder.

The answer is no, my right hon. Friend cannot use clause 5 to instruct the franchising director to use his powers to exclude BR from the bidding.

Finally, my hon. Friend asked me about vertical integration. That is not part of the Government's policy, which is why the franchising director has to refer these matters to my right hon. Friend. I am sure that that must be right, and we have set out our reasons for that.

I very much welcome the speeches by my hon. Friend the Member for Lewes and other hon. Friends. I hope that the assurances that I have given on these important issues will make them feel able to vote with the Government. I commend to the House both the motion moved by my right hon. Friend the Secretary of State to disagree with the Lords amendment No. 31 and the Government amendments in lieu.

Question put, That this House doth disagree with the Lords in the said amendment :--

The House divided : Ayes 316, Noes 282.

AYES

Division No. 381] [9.10 pm Ainsworth, Peter (East Surrey) Aitken, Jonathan

Alexander, Richard

Alison, Rt Hon Michael (Selby)

Allason, Rupert (Torbay)

Amess, David

Ancram, Michael

Arnold, Jacques (Gravesham)

Arnold, Sir Thomas (Hazel Grv)

Ashby, David

Aspinwall, Jack

Atkins, Robert

Atkinson, David (Bour'mouth E)

Atkinson, Peter (Hexham)

Baker, Nicholas (Dorset North)

Baldry, Tony

Banks, Matthew (Southport)

Banks, Robert (Harrogate)

Bates, Michael

Batiste, Spencer

Beggs, Roy

Bellingham, Henry

Bendall, Vivian

Beresford, Sir Paul

Biffen, Rt Hon John

Blackburn, Dr John G.

Body, Sir Richard

Bonsor, Sir Nicholas

Booth, Hartley

Boswell, Tim

Bottomley, Peter (Eltham)

Bottomley, Rt Hon Virginia

Bowden, Andrew

Bowis, John

Boyson, Rt Hon Sir Rhodes

Brandreth, Gyles

Brazier, Julian

Bright, Graham

Brooke, Rt Hon Peter

Brown, M. (Brigg & Cl'thorpes)

Browning, Mrs. Angela

Bruce, Ian (S Dorset)

Budgen, Nicholas

Burns, Simon

Burt, Alistair

Butcher, John

Butler, Peter

Carlisle, John (Luton North)

Carlisle, Kenneth (Lincoln)

Carrington, Matthew

Carttiss, Michael

Cash, William

Channon, Rt Hon Paul

Churchill, Mr

Clappison, James

Clifton-Brown, Geoffrey

Coe, Sebastian

Colvin, Michael

Congdon, David

Conway, Derek

Coombs, Anthony (Wyre For'st)

Coombs, Simon (Swindon)

Cope, Rt Hon Sir John

Cormack, Patrick

Couchman, James

Cran, James

Currie, Mrs Edwina (S D'by'ire)

Curry, David (Skipton & Ripon)

Davies, Quentin (Stamford)

Davis, David (Boothferry)

Day, Stephen

Deva, Nirj Joseph

Devlin, Tim

Dicks, Terry

Dorrell, Stephen

Douglas-Hamilton, Lord James

Dover, Den

Duncan, Alan

Duncan-Smith, Iain

Dunn, Bob

Durant, Sir Anthony

Elletson, Harold

Evans, David (Welwyn Hatfield)

Evans, Jonathan (Brecon)

Evans, Nigel (Ribble Valley)

Evans, Roger (Monmouth)

Evennett, David

Faber, David

Fabricant, Michael

Fairbairn, Sir Nicholas

Fenner, Dame Peggy

Field, Barry (Isle of Wight)

Fishburn, Dudley

Forman, Nigel

Forsyth, Michael (Stirling)

Forsythe, Clifford (Antrim S)

Forth, Eric

Fowler, Rt Hon Sir Norman

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