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Mr. Brown: We are against capital punishment.
Mr. John Bercow (Buckingham): Even of lawyers?
My hon. Friend rightly draws attention to the problem of tax evasion. Since 1997, we have increased significantly the legislation that tackles tax evasion. Today, we have announced a change in the law on the ability of the Inland Revenue to pass information to the police. That information could not previously be passed on unless treason or murder was involved. We believe that a range of crimes justify passing information from the Inland Revenue to the police. We will consult on the details of the legislation, but the police will have more sources of information from the Inland Revenue about crimes that are being committed.
We are therefore not only increasing the laws that tighten up action against tax evasion, but making it increasingly possible to deal with financial terrorism through giving the Inland Revenue the ability to pass information to the police authorities in specific instances.
Lembit Öpik (Montgomeryshire): Will the Chancellor ensure that the Secretary of State for Northern Ireland, as well as Ministers in the south of Ireland and the Stormont Assembly, are consulted as the measures are implemented?
Mr. Brown: As I said earlier, some measures that we are introducing today already apply in Northern Ireland and we are therefore extending them to the rest of the United Kingdom. However, if measures specifically affect Northern Ireland or if there is a general need for discussion on measures that will affect Northern Ireland as they apply to the United Kingdom as a whole, we shall consult.
Roger Casale (Wimbledon): My right hon. Friend is right to stress that money laundering and other illicit financial transactions are a worldwide phenomenon, so he is also right to stress the importance of co-operative action at European level in framing an international response.
However, will he also consider the examples of best practice in other European countries, in particular the experience of a previous Italian Government and the Banca d'Italia in tackling organised crime in that country by making banking procedures more transparent, so cutting off Mafia access to Mafia funds? That example was studied in depth on a trip in March 2000 by the British-Italian parliamentary group to the Banca d'Italia and the Italian equivalent of the Speaker's Office, and I would be pleased to make the report available to my right hon. Friend.
Mr. Brown: I am grateful to my hon. Friend. We shall examine the successes and the weaknesses of operations across the world in considering what we can best do. I believe that the degree of international co-operation now allows us to share experience about what is working and what is not likely to work. The EU money-laundering directive is on the table and I gather that it is to be discussed by the European Parliament on Wednesday. It is possible to move forward and the directive could be implemented next month. I urge all Members of the European Parliament to join us in getting it through.
Railtrack
5.22 pm
The Secretary of State for Transport, Local Government and the Regions (Mr. Stephen Byers): With permission, Madam Deputy Speaker, I wish to make a statement concerning Railtrack, to describe to the House the worsening financial crisis facing Railtrack, which led the Government to petition for railway administration on 7 October, and to outline the further measures that we intend to take to put the interests of the travelling public first.
The House will be aware of the history of Railtrack, as will Conservative Members. When the railway industry was restructured following the Railways Act 1993, Railtrack was created by the Conservative Government. In 1996, Railtrack was privatised by the Conservative Government. It was the only publicly floated utility subsidised by the Government. That subsidy made up the majority—in fact, some two thirds—of its revenue.
After the Hatfield train crash nearly 12 months ago, the whole network was urgently reviewed and fundamental safety issues were addressed. That added significantly to costs, with Railtrack claiming that it needed an extra £700 million a year to put the track in a proper condition.
On 2 April 2001, Railtrack asked for help because of its pressing financial difficulties. We brought forward £1.5 billion of investment from the period beyond 2006 to the five-year period starting on 1 April 2001. The first instalment of that deal was paid on 1 October this year in full—£337 million.
However in May, June and July, the company's position worsened dramatically. On 25 July, at a meeting in my office, the chairman said that the position was far worse than he had thought in April. Unless extra financial assistance from the Government was provided, it was clear that on 8 November, when Railtrack was due to give its interim results, it would be unable to make the critical statement that it was "a going concern". The effect of that would have been disastrous. Immediately I ordered intensive discussions with Railtrack.
In August, Railtrack's advisers came back to the Department and said that there were simply three options: restructuring, renationalisation or, as they described it, receivership. Thus it was Railtrack's advisers who first raised the possibility of insolvency if no additional Government funding was available.
I immediately asked my officials to investigate the restructuring option, which involved the provision of yet more funding to Railtrack. Railtrack asked for Government funding to cover all its costs plus a profit and a four-year suspension of the regulatory system. Those were Railtrack's proposals.
Given the company's demands, we began to prepare for the possibility that we might be unable to provide additional funding and that, as a consequence, Railtrack would be insolvent. To protect passengers' interests it was clearly right to explore the need for railway administration on a contingency basis. As a result, preliminary contact was made with Ernst and Young on 23 August.
There were further negotiations and various modified proposals, but it was becoming obvious that the company could not continue unless we offered to fund whatever
losses it might have for a period of several years. I took the view that I simply could not responsibly enter into such a guarantee on behalf of the British taxpayer.We carried on discussions until 3 October, but no way out of the dilemma could be found: either we gave the guarantee on money, or the company became insolvent. So, on Friday 5 October, I reviewed all the relevant papers and considered all the options, including Railtrack's proposed rescue package and the additional Government funding that would be required. Railtrack's proposals were cast in such a way that it was hard to be sure about the precise sum that it was seeking, but it was effectively an open-ended funding request to the Government. I decided that I could not give Railtrack a blank cheque.
That very afternoon, I informed John Robinson, the chairman of Railtrack, of my decision and of my intention to petition the High Court for a railway administration order if the company was insolvent. The order was granted on 7 October. Railtrack was taken into administration because it was, or was likely to become, unable to pay its debts. Our petition to the High Court showed that there would be a deficit of £700 million by 8 December this year, rising to £1.7 billion by the end of March next year.
In granting the order, Mr. Justice Lightman said:
- "This is clearly a case where the making of a railway administration order is not only appropriate, but absolutely essential, and I shall therefore make that order immediately."
- "The Government stands behind the rail system but not individual rail companies and their shareholders who need to be fully aware of the projected liabilities of the companies in which they invest and the performance risks they face".
The directors of Railtrack have now said that they want £3.60 a share. On our calculations, that would require the transfer of up to £1.5 billion of new money from the taxpayer direct to Railtrack shareholders. We believe that it would be wrong to make new money available, and we will not do it.
In the light of the administration of Railtrack, we believe that we should now consider reshaping the structure of the industry in a way that recognises that the needs of the travelling public must come first. We shall propose to the administrator that a private company limited by guarantee be established to take over Railtrack's responsibilities. Any operating surplus it makes would be re-invested in the railway network. Such a company would have the needs of the travelling public and other users as a priority. As it would have no shareholders, we would remove the conflict between the need to increase shareholder value and the interests of rail passengers.
The company we propose would have responsibility for operations, maintenance and renewals. It would have a small professional board of executive and non-executive
directors. Performance targets would be set and linked to levels of service, safety and value for money. The board would work on commercial lines but would focus solely on delivering a safe, well-maintained rail network that is fit for the 21st century.The company would be able to promote collaboration and co-operation around the wheel and track interface, the absence of which has been one of Railtrack's weaknesses. A private company limited by guarantee would need far less intense regulation. We therefore intend to streamline the existing structure while still recognising that there will be a continued need for some form of independent economic regulation.
We shall discuss these proposals with the industry's key players. We are clear that it is important for the new structure to provide strong strategic leadership; a cut in the burden of day-to-day interference; an end to the self-defeating system of penalties and compensation; clearer accountability; and an end to perverse incentives.
The new company that we shall propose would be able to raise funds in the market. [Hon. Members: "Which market?"] Wait and see. Private sector funding would operate in partnership with Government to deliver the 10-year plan objectives for rail. Under our proposals, we intend to offer all existing lenders to Railtrack plc the opportunity to transfer to the new company with no loss of principal or interest. Any debt transferred to the new company would be financially sound and would have, at the time of transfer, good long and short-term credit ratings.
Many talented and motivated people work in Railtrack. They have worked with dedication, especially over the past seven days, and I thank them for that. I know that they and the rest of the industry want an improved railway system. I believe that, with the demise of Railtrack, that is what they will get. The Government are committing some £30 billion to the network over the next 10 years.
The administration of Railtrack provides us with a golden opportunity to create a railway system that is united and not fragmented; a railway industry with a shared strategic vision; a railway industry that can respond to the needs of our time; and a railway network provider that answers to the millions of passengers and not to private shareholders.
Our decisive action makes all that possible, and I commend it to the House.
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