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The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Glenda Jackson): After two years of Labour Government.
Mr. Jenkin: The Minister is desperate. The Government have done nothing for two years; they have introduced no legislation. Sir Alastair Morton has read too much of the newspaper hype circulated by the Government at rail summits rather than looking at the actual state of the railways. He said that he was pleasantly surprised by how much was being achieved under privatisation. He stated:
- "I believe our railways have moved into a growth scenario above and beyond the economic cycle." [Interruption.]
-
The hon. Member for Truro and St. Austell (Mr. Taylor) should listen to the chairman of the shadow SRA. Sir Alastair Morton continued:
"In the past few years domestic rail passenger kilometres have risen over 20 per cent. and freight something not dissimilar or better. One thousand extra trains are running every day. This is not failure, neither at the policy nor the practical level."
I shall continue to quote from Sir Alastair Morton, because his comments are instructive for our consideration of the Bill. He said:
Labour's attitude, which lies behind the Bill, is that everything to do with integration will lead to central planning and to greater planning, and that anything to do with competition is bad. If there is competition on the railway, that is fragmentation. [Interruption.] That is the general thrust--if there is competition, it is bad. One would never believe that, for example, perhaps the most complex international transport system is that of the many privately owned airlines; they fly into privately owned airports, and each airline has its own ticketing, staffand investment programme. That is a fantastically complicated system, but it works.
The system works through competition. Innovation, investment and all the benefits that passengers want thrive under competition. However, Labour are still living in the past--where the railways have to be treated like some socialist relic from a bygone age. Old Labour are out in force today to defend the old icons of a publicly controlled railway. They are defending not a Bill that is overtly for renationalisation, but one that is certainly surrogate renationalisation. [Hon. Members: "Vote against it."] We shall certainly vote against the Bill--let there be no doubt as to that.
Sir Alastair Morton said repeatedly that the future of the railway is about "investment, investment, investment". I thoroughly agree with that sentiment. In relation to the Bill, the problem is not whether we have a Strategic Railway Authority, but the danger that the objectiveof achieving greater investment will be deeply counterproductive.
There are three connected problems. First, the Bill gives excessive powers to the Secretary of State, the SRA and the regulator. Secondly, money has been liberally
discussed as though it would be the special project of particular hon. Members, but no guarantees have been given. The third problem is where the capital will come from--in fact, it will be through the confidence of private investors.
The excessive powers for the SRA and the Secretary of State reflect the vigorous Government rhetoric that is strongly anti-privatisation. The regulator's new powers were reflected in a somewhat alarming speech to train operators earlier this month. There was a suggestion of the danger that those powers will be used liberally, extensively and punitively. That may well reflect the prejudices of Labour Members who were against privatisation in the first place, but I counsel them that it might not help the process of investment and confidence building in the railway system that we need.
During their speeches, Labour Members constantly expressed totally unrealistic expectations, as though new powers for the SRA, the Secretary of State and the regulator would deliver new money into the system. That brings us to the second problem: where is that additional money going to come from? Because of their financially illiterate background, Labour Members fail to realise that every penny of investment has to be paid for: either it has to be paid direct from the taxpayer, or it is capital that has to be serviced, has to provide a return and has to be repaid out of money from fares or from additional public subsidy.
In another interesting extract from his speech, Sir Alastair Morton fired the opening shot in the battle that will rage between the SRA and the Treasury, saying of the franchises:
Mr. Prescott:
That is rubbish.
Mr. Jenkin:
Railtrack has published a network statement--[Hon. Members: "Oh!"] I can see that relations between Railtrack and the Government are blossoming. If Railtrack publishes a prospectus for £27 billion of investment, one would have thought that the Deputy Prime Minister would take every opportunity to help it to make that investment, rather than criticising the company, running it down and making its job more difficult. In addition to that investment, the train operating companies and the leasing companies have committed billions to new rolling stock. All that investment has to be paid out of revenue, either fares or money from the taxpayer. More investment needs more income.
Mr. Bennett:
The hon. Gentleman was a Member of Parliament when the privatisation set-up was established, under which the subsidy was to continue to decline. Is he now in favour of the subsidy declining, or does he want it to be increased?
Mr. Jenkin:
One of the successes of privatisation is that the industry is becoming less reliant on the taxpayer.
The question of money leads us to one of the most interesting clauses in the Bill, clause 17, on which the Secretary of State bases his claim that he will force Railtrack and the train operating companies to invest. The clause would insert into the Railways Act 1993 new section 16A, which states:
Mr. Jenkin:
If the Bill contains no new powers, why are we bothering with it? Perhaps the right hon. Gentleman can tell me that.
The regulator can give such a direction only
That leads us to a third problem, which relates to clause 8. Clause 8 gives the authority power to
As my right hon. Friend the Member for Wokingham (Mr. Redwood) said, the Deputy Prime Minister wants to play trains, does not understand the private sector and thinks that, in order to facilitate investment in the railway, he must have the whip hand. If he has the whip hand over the money, his decisions, which will be second-guessed by the Treasury, will increasingly become the governing factor in the financial viability of the entire railway. Every time that the SRA wants to apply some of the £3 billion borrowing facility to a new project, the decision will finish up on the desk of a Treasury Minister. That will drag the railway back, away from the free-market investment that has doubled investment in the railways since privatisation, to investment programmes that are second-guessed by Ministers.
"I have found in my first three months a battered, historically under-funded, previously non-growth system now in the process--the painful process--of transforming itself"--
no credit for the Government there--
"into a modernised, growth oriented, larger and better system. The trouble is that while management can improve service quality in months, system capacity takes years not months."
The Government should learn that lesson. Sir Alastair continued:
"The correct question is:--Is it happening? And not:--Why hasn't it happened already?"
He mentioned the requirement for a "decade of change" during the 10 years after privatisation. We are now in the middle of that.
"The Treasury must not see their emergence from subsidy as a continuing source of 'tax' revenue."
He clearly believes that the subsidy that the Government are withdrawing from the railways cannot be withdrawn if the sort of investment that he wants is to be delivered. That underlines a question that the Bill does not begin to resolve. The briefing on the Bill was all about how to "force" Railtrack to make more investment, yet Railtrack is already committed to a £27 billion investment programme--
"The Regulator may, on the application of the Authority,"--
that is the SRA--
"give to a person who is a facility owner in relation to an existing railway facility, a direction . . . to provide a new railway facility; or . . . to improve or develop the existing facility."
Mr. Prescott:
That is true now.
"if he is satisfied that the person will be adequately rewarded for providing, improving or developing the facility, taking into account"
any receipts or benefits that may be received. Even the Secretary of State, in a new Bill, cannot magic money out of the air--that is what he is pretending to the British public, especially the travelling public.
"make grants, make loans, or give guarantees . . . and enter into agreements for the purpose of securing the provision, improvement or development of any railway services or railway assets."
We know what the hidden agenda is: to change the railway's financing structure because the Secretary of State does not feel that he has enough power over it. He feels that it is not right to put subsidies through amarket mechanism to generate spontaneous market-led innovative investment. He wants to apply subsidy where he can lever in investment himself.
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