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Mr. Byers: My hon. Friend makes a number of very important points. The report that her Select Committee—the Transport Sub-Committee of the Select Committee on Transport, Local Government and the Regions—published on 29 March showed very clearly Railtrack's failures in terms of renewal and maintenance and how it had simply failed to manage the railway network.

We want a new company, coming out of administration, that will not face the conflict of having to enhance value for shareholders but will have one overriding priority—the interests of the travelling public and the freight industry. As it will be a not-for-profit organisation, any operating surplus will be reinvested in the industry, doing away with the conflict that existed under Railtrack. That will make a real difference for the travelling public. Railtrack's demise offers a golden opportunity to recast the railway industry in our country and to create a railway industry that is fit for the 21st century, which simply is not the case at the moment.

Mr. Don Foster (Bath): Given the Tories' record on the railways, does the Secretary of State not agree that a degree of contrition from the hon. Member for Brentwood and Ongar (Mr. Pickles) would have been appropriate?

Does the Secretary of State agree that it was vital to end, in a monopoly, the obscene conflict between shareholder profit and passenger safety? Will he confirm that his proposal to turn those parts of Railtrack that relate directly to the running of the railways into a not-for-profit, public-interest company are not only sensible but mirror proposals made by Liberal Democrat Members as early as February this year?

Will the Secretary of State acknowledge, however, that the way in which he has handled this affair over the past few days has led to confusion about who is in charge of what and who owns what? After a botched privatisation, are we not in danger of his botching what is, in fact, a sensible solution?

I agree with the Secretary of State that the public have been rightly concerned that shareholders have received money from Railtrack while, at the same time, the company has been going round with a begging bowl asking for more money from taxpayers. Will he confirm that, even today, Railtrack's website acknowledges that its property portfolio assets are expected to yield a return of £1 billion to shareholders over the next five years? Does he agree that that is the equivalent of £1.80 per share, in addition to the value of all the other assets that have been described elsewhere? Will he confirm yet again, as he has already today, that there will be no more taxpayers' money going to shareholders?

Given that the Secretary of State has at long last accepted the need to start to reintegrate track and train, will he now stop his crazy proposal to do exactly the reverse for the London underground?

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Mr. Byers: We are proposing a sensible alternative to Railtrack. When the hon. Gentleman has had time to study the details, he will realise that it our proposals are not the same as his—at least, I hope they are not.

Mr. Foster: I gave them to the right hon. Gentleman.

Mr. Byers: I am conscious that the hon. Gentleman gave them to me; that is why I think they are not the same, but we can discuss that a little later.

Railtrack plc is the body in administration. Railtrack Group is not in administration; it is still being run by the board of directors and it still has shareholders. There will be assets and value in Railtrack Group, and that value can be used for the benefit of shareholders. That is an important point to make, because it shows the need to ensure that we keep the rail network operating—the Government's top priority—and that Railtrack Group, which is not in administration, can find value from its assets. If it can do that, that value can be made available to shareholders. The important point, however, is that new Government money will not be given to compensate shareholders. We feel that to do so would be inappropriate.

The hon. Gentleman's final point was about the implications for the London underground, whose position is totally different from that of Railtrack. The important thing to remember about our proposal for London Underground is that, although it has been portrayed by our critics as a Railtrack on the underground, the reality is that it will continue to be a publicly run company. London Underground will have contracts with the private sector, so the difficulties that the hon. Gentleman mentioned will not be repeated in our proposals to modernise and invest in the tube.

Paul Flynn (Newport, West): Does the Secretary of State agree that this calamity was prophesied precisely by the report of the Transport Select Committee in 1993? That Committee opposed privatisation, even though it was chaired by a Conservative and had a Conservative majority. Should we not look for Conservative Members to offer a small apology for privatisation?

The model being proposed now is similar to one that Glas Cymru introduced. We have discovered a genuine third way: a combination of the vigour of the private sector and the security of state enterprises.

Mr. Byers: My hon. Friend is right when he refers to the reservations that many Conservative Members had about privatisation when it was introduced in 1993. At that stage, the proposal was for Railtrack to remain in the public sector, but in 1996 the then Prime Minister, John Major, was desperate for a privatisation and, as there was nothing else left, he went for Railtrack. We are now living with the consequences of that flawed and failed privatisation.

My hon. Friend referred to Glas Cymru, formerly Welsh Water, which provides a similar model to the one that we adopting in this case. He referred to it as a "third way", and it was interesting to hear him say that. It is the first time that I have heard him talk favourably about the third way—long may that continue.

The important point is that Labour Members have made it clear that modernisation and reform of public services are important. We have said that, when we think the

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private sector can add value, it has a role to play. Railtrack was not adding value; it was destroying the rail network. The Government were therefore prepared to take action to put the public interest first. We have done that for railways and we shall do it for public services as well.

Sir Brian Mawhinney (North-West Cambridgeshire): When the Secretary of State instructed his officials on 25 August to commence discussions with Ernst and Young preparatory to taking Railtrack into administration, did he also instruct his officials to tell the stock exchange that that is what he was doing?

Mr. Byers: We were very much aware, as is the right hon. Gentleman, of the Government's legal responsibilities and of the legal responsibilities of the directors of a quoted company. We took that into account.

Mr. Peter Pike (Burnley): I congratulate my right hon. Friend on taking this action, which is the best way of saving the railway system in this country. Does he accept that most people in the north-west believe that the failure resulted from the Tories' privatisation of the railway system and the way in which they broke it into many fragments and different companies? Most of the public believe that the system was bankrupt and that it was obscene to pay the latest dividend. Most people in the north-west also believe that we would not have got the second phase of the west coast main line if action had not been taken to save the situation.

Mr. Byers: The west coast main line will be one of the top priorities, and we already discussing with the administrator how we can make sure that the project moves forward far more positively than it has under the stewardship of Railtrack.

I am pleased to hear that the measures that we have taken for Railtrack are popular in the north-west. I am sure that they are, and I am also confident that they will be popular throughout the whole United Kingdom.

Mr. Kenneth Clarke (Rushcliffe): Did the Secretary of State's reply of a few moments ago mean that it is still the Government's policy that private sector finance will be the major source of future investment in the railways and many other important infrastructure projects? If so, does he not realise that his obvious scorn for the protection of shareholder value and for the notion of a reasonable return on capital will make it impossible to raise genuine private finance for the west coast main line, for the London underground and for many other projects unless they are accompanied by Government guarantees, the minimal transfer of risk or a hugely increased cost of the borrowing required? If he does not accept that, he does not realise how much damage he has done to the interests of the railway network, the travelling public and many other people looking for much-needed investment in our public services and utilities.

Mr. Byers: What is very instructive is how some of the main architects of the crisis that was Railtrack—[Hon. Members: "Answer the question."] I shall—[Interruption.]

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Madam Deputy Speaker: Order. The Secretary of State is responding to questions.

Mr. Byers: I shall answer the question, but the public need to note that the architects of Railtrack and its privatisation have failed to utter a single word of apology during this statement.

On the specific points made by the right hon. and learned Member for Rushcliffe (Mr. Clarke), Railtrack comprises Railtrack plc and Railtrack Group. I thought that I made it clear that the value of the assets that are held in Railtrack Group can and will be allocated to shareholders if the directors so determine. I give the commitment on behalf of the Government that we will do all that we can to enhance, if it is appropriate, the value of those assets, but no new public money will go into Railtrack because that would be wrong and inappropriate.

I do not scorn the position of shareholders, but I recognise that in a dynamic market they have to decide where they invest their money. We made it clear on 2 April that as a Government we do not stand behind individual companies or shareholders. The hon. Member for Brentwood and Ongar (Mr. Pickles) asked who told the shareholders that. What is interesting is that on 11 April Railtrack's chief executive, Steve Marshall, was clear about it. He said:

the Government

that we have entered into

That is the situation.

Most people recognise that Railtrack was unique in the involvement of the private sector. There will be opportunities for private finance to work with Government funding. With the assurances that we have given over the past seven days, we are confident that the private sector will continue to want to be involved in public-private partnerships.

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