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Mr. Eric Pickles (Brentwood and Ongar): I thank the Secretary of State for providing me with advance sight of his statement. I am sure he will be shocked to realise that it arrived only a few moments before the start of the debate. No doubt he will strive to ensure that, in future, statements arrive on time.

I commend the right hon. Gentleman for his power of prophecy. Does he recall saying on 1 July, on "Breakfast with Frost", that the railways

and arguing that nationalisation would

I congratulate the right hon. Gentleman: that is exactly what has happened today. He was right in saying that it would take a few years to establish the nationalised system, and that the railway network would simply get worse.

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The Secretary of State has driven a coach and horses through the Government's 10-year transport plan. The net results of his venture will be higher fares, fewer trains, a reduction in passenger numbers, and a decline in freight. The expansion of the network is now yesterday's agenda; we will return to managing decline.

Interestingly, the right hon. Gentleman said in his statement:

So it's goodbye to expansion: the company will clearly have no room for expansion of the rail network.

The right hon. Gentleman also said that the Government would guarantee £30 billion. That is just half of what is due from the Government's plan. Where is the £34 billion of private investment to come from? The best we can hope for is a 12-month delay in investment in such vital services as the west coast and east coast main lines, Thameslink 2000 and the train protection system. For 12 months, nothing much will happen—and who will trust the Government again? [Hon. Members: "Everyone."] Certainly not the City institutions, which will run a mile. If, as the right hon. Gentleman suggests, the new company is able to raise money, it will have to do so at a premium, because the Government, having reneged on an agreement, will not be trusted again.

The Government certainly will not be trusted by ordinary investors. It is all very well for the Secretary of State to talk about what was sent through the stock exchange news service, but what about the signalmen? I do not suppose that many of them consult the stock exchange news service. Why did the right hon. Gentleman not mention this on "Breakfast with Frost"? Was it because he forgot?

Let us consider the plight of the ordinary investor. If the right hon. Gentleman had seen today's edition of The Sun, he would have read about a 33-year-old signalman from Middlesbrough who had worked for Railtrack and British Rail since leaving school at 17. He owns 6,870 Railtrack shares—[Interruption.]

Madam Deputy Speaker (Sylvia Heal): Order. The hon. Gentleman is entitled to be heard.

Mr. Pickles: I am grateful for your protection, Madam Deputy Speaker.

Matthew, the signalman, said:

According to that signalman, what the right hon. Gentleman has done

Ninety-two per cent of Railtrack employees participated in the company's share scheme. Many of them exercised their option to purchase additional shares long after the Government had secretly decided to make their savings worthless. They put their trust in the Government, and the Government let them down.

The Secretary of State needs to answer some specific questions. On what date did he take the decision to formulate the plan to put Railtrack into administration as

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the preferred option? Is it true that he had no face-to-face meetings with the chairman of Railtrack for a whole three months during the summer? What advice did he receive from the Rail Regulator or the Strategic Rail Authority? Is it true that the Government blocked a payment of £162 million to Railtrack, which the company should have received on 1 October, under a funding schedule published by the Rail Regulator in October 2000 and agreed by the Deputy Prime Minister in April 2001?

Is it true that on 3 October, shortly before notifying Railtrack management of the Government's intention to push the company towards administration, the Secretary of State spoke directly to the Rail Regulator and warned him to take no action to assist Railtrack? Is it true that the regulator was threatened with emergency legislation to deprive him of powers if he tried to assist Railtrack?

Most importantly of all, what guarantee can the Secretary of State provide that the rail network will require any less public funding than was requested by Railtrack?

Railtrack is bust because the Government decided to make it so, as the letter from Railtrack today shows. That demonstrates the danger of politicians interfering with the rail industry. The Secretary of State sought a political solution when a financial one was needed. He grandstanded when care was needed. What once appeared to be a carefully crafted political coup now appears to be an ill-thought-out mess.

This action has been the most destructive act to the railways since Dr. Beeching. The Secretary of State clings to office with his despised spin doctor. He should do all of us—including the rail industry—a favour, by quitting today.

Mr. Byers: There we have it.

I congratulate the hon. Gentleman on his position. I am disappointed that it was not the shadow Secretary of State who responded to the statement, but I look forward to crossing swords with her in due course.

The hon. Gentleman is right that on 1 July I appeared on the Frost programme. At that time, we thought that the 2 April deal would finance Railtrack through this year, into next year and for the five-year control period. It was not until 25 July, when John Robinson, the chairman of Railtrack, came to my office, that we were informed of the grave financial circumstances facing the company. From then on, it was clear that we faced a dilemma: either to fund Railtrack with a blank cheque or to put in place a contingency plan in case railway administration was needed. It is prudent and appropriate that we plan on a contingency basis. If we had not done that, Railtrack would have collapsed into receivership and the network would have been in chaos.

Since last Monday, the trains have continued to run and no one has lost their job. We are in a period of railway administration and the company that subsequently emerges will put the interests of the travelling public first. It will be focused on operations renewal and maintenance. We will use special-purpose vehicles for enhancement projects. We are moving in that direction already.

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As I said in my statement, I took my decision on 5 October after considering all the relevant documents. The Government have met all our legal obligations regarding payments to Railtrack.

Mr. Mark Francois (Rayleigh): Not to shareholders.

Mr. Byers: Despite what the hon. Gentleman believes—which is a sign of the Conservative party's priorities—the Government are not here to fund the shareholders of private companies. During privatisation, £700 million was paid in dividends to Railtrack shareholders. It was a company in crisis and came to the Government with a begging bowl month after month. It begged for taxpayers' money while handing out dividends to shareholders.

A sign of Railtrack's conflicting priorities is the fact that, while it faced a deficit of £700 million by this December, it paid yet another dividend to shareholders of £88 million at the beginning of October. That is the reality. Shareholders and investors have a choice. The Government made it clear on 2 April that we would stand behind the industry, not behind individual companies or shareholders.

Interestingly, we did not hear a word from the hon. Member for Brentwood and Ongar (Mr. Pickles) about the problems that Railtrack faced as a result of the very nature of privatisation. He did not even attempt to explain the dogma that led to the privatisation of Railtrack, but we must be very clear about the fact that Railtrack was taken into administration because it could not control its costs. Its overrun on the west coast main line amounted to billions of pounds, and it had hundreds of millions of pounds of liabilities that were due to be paid, so we had to act. We acted in the interests of rail passengers and the public, and we make no apology for so doing.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich): Is my right hon. Friend aware that the fact that Railtrack was, to all intents and purposes, bankrupt has been an open secret in the industry for many months? Indeed, if it had not been able to keep coming back to the Government for more and more money without any evidence of what it would do with it, it would have been automatically put into bankruptcy. Is he also aware that the real problem has been that, when Railtrack was criticised for not keeping up its maintenance, for not seeking proper funding and certainly for not being able to carry out the costings of the modernisation programmes to which it was committed, it was handing out £1 million in compensation to failed executives?

Is my right hon. Friend further aware that, unfortunately, the people who will suffer are the railwaymen who, instead of being offered bonuses, for which they had worked and to which they were entitled, were paid off by Railtrack with more shares, although it must have known what was going to happen because the City of London had made it very clear what it thought of the company?

Will my right hon. Friend give the House a very simple guarantee that the new company will not, in any circumstances, continue to pour money in without guarantees to the travelling public and to those who need a modern and rebuilt railway system that it will be spent on the railway, that it will be paid to those who maintain

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and build the railway, that it will not go into contractors' pockets and that it will not be handed over to other companies that have proved, in many instances, that they cannot run their existing operations?

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