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The Minister for Transport (Mr. John Spellar): Did my hon. Friend hear the information that was conveyed earlier? It gave a good reason for Ministers not being present. They are involved in an important historic event and he is getting things grossly out of proportion.
Mr. Dalyell: I happen to think that the House of Commons is important. When it has such a debate, I ask myself what events require all senior Ministers to be elsewhere. It is not a question of amour-propre, but of parliamentary democracy.
Ms Abbott: Whatever this evening's circumstances, it is not the first time that senior Ministers under pressure have been hung out to dry by their Treasury Bench colleagues. On the subject of Ms Moore, she should at least have been suspended. At best, the failure to suspend her suggests collusion with the attitude behind her e-mail; at worst, it raises the suspicion that she cannot be moved because she knows too much.
I want to concentrate on the Secretary of State's counter-attack. He claimed that he had important work to do on the railway industry and represented bankrupting it as a triumph. He suggested that we should acquit him of the serious charges of which he stands arraigned by my hon. Friend the Member for Maidenhead (Mrs. May) and others because of that work. I want to demonstrate why he should be condemned and lose his position in office. In addition to the matters eloquently raised by other hon. Members, he has made a catastrophic mess of the railways and of the contribution that the public-private finance initiative could make to our economy.
The Secretary of State did not do the House the courtesy of setting out his proposals for Railtrack during the debate, although he said that he would like to refer to them. For the sake of greater accuracy, I have been able to get a copy of the written answer that he provided through the normal channels when the debate was taking place. It would have been much better had he told us of its contents prior to the debate or as part of his contribution to it. Such matters should not go unexamined simply because he finds it more convenient to weasel out such details around the back while we listen to a serious debate on the Floor.
Mr. Spellar: Is the right hon. Gentleman saying that the Secretary of State should not have given way to the Opposition's numerous interventions on other issues? He might join us in regarding them as less important, but his colleagues wanted to focus on them and they would have criticised my right hon. Friend had he not given way and responded.
Mr. Redwood: Of course the right hon. Gentleman should have taken those interventions and attempted to answer the serious charges levelled against him in this Opposition day debate. He decided to try to hijack the day by also referring to the railway industry. It is a discourtesy to the House that he did so by means of a written answer, which we could not easily obtain as we were in the debate, while pretending that we knew what he was on about in his other remarks.
The right hon. Gentleman split his speech into two halves. I am glad that he took interventions from colleagues on the Opposition Benches. It was the least that he could have done in the circumstances. I give him no particular marks for doing soI would have given him anti-marks had he refusedbut as he spent about 20 minutes on the railways, it would have been better if he had told the House more about what he had in mind.
In the written reply, the Secretary of State claims that his successor company limited by guarantee will have the same sources of income as the Railtrack company that he has just helped to bankrupt, namely, that it will have
The company thought that those were guaranteed payments. It was on the basis of that promisethat contract, which is recorded in the accountsthat the directors and their auditors signed off those accounts on a going-concern basis. This is a deeply serious matter. People bought and sold shares on the back of that arrangement. People lent money to Railtrack to carry on with new projects on the back of it. Bankers took comfort from it to finance the railway industry as we would want. We discovered that although the Government were said to be party to that guarantee of £1.5 billion in accelerated payments, they could, at the drop of a hat, change their mind and remove the money.
How is anyone to be sure that if the Government set up the new structurea company limited by guaranteetheir promises of funding for a substantial portion of the money that it needs will be any more worth while than those worthless promises to the shareholders, employees and all those involved in the business of Railtrack?
We also learn from the statement that the successor company will have access to the same property income as the predecessor company. How can that be true? In his haste, the Secretary of State decided to bankrupt Railtrack plc, the subsidiary company, and not Railtrack Group, which is the company in which people have a shareholding interest and which was the larger company that was privatised with all the assets and interests. When he does some of the more detailed work, he will discover that some of the properties are owned by Railtrack Group but are not also owned by Railtrack plc. Surely he must admit that some of the property is available for sale and distribution to the shareholders of the company that is in suspension owing to the bankruptcy of its principal subsidiary, thanks to him, and that it will not necessarily be made available for the future good of the railways and to buttress the balance sheet of the successor company. It is going to need a lot of buttressing if it is to persuade people to lend it substantial sums of money.
Even odder is the Government's statement that this new companywith no equity, lots of debts inherited from the old company and a wobbly guarantee from the Government on whether it will get any grantwill have
Does the Secretary of State realise that the company that he bankrupted had a single A credit rating, so he is aiming for a substantially lower rating for his successor company? Surely that makes him a bit of a noodle. It will certainly mean that he will end up borrowing money, through this company, on a much more expensive basis than did the predecessor company. Far from making the service cheaper and better for the rail travelling public and all those involved in the rail industry, by his own admission he wants to create a company with a worse credit rating, which will have to pay more for its money. On the basis of the prospectus so far and the few flimsy paragraphs that I have here, I do not see how the company could possibly have a BBB credit rating. It is more likely to have the junk bond rating that is accorded, for obvious reasons, to Railtrack in administration.
The Secretary of State optimistically says that all those problems will eventually be resolved because, over the years, the company will build up a big reserve out of the profits that it will undoubtedly make. Has he seen the figures for the most recent trading period of the old Railtrack company? Does he not understand that the company was burdened with about £750 million of additional costs by regulatory and Government decisions? Unless he is about to lower safety standards and change the regulatory requirements, those costs will continue, so how is the new company suddenly to make money when the old company was unable to, struggling as it was with the regulatory burden?
The Secretary of State should now grasp this important point. As he decided to put the junior company into administration, he will have a problem in ensuring that he does not intervene unnecessarily in the affairs of a private sector company with private sector shareholders that is not in administration, namely Railtrack Group. He also has to be careful not to offer anything unreasonable for one possible solution to the mess that he has created without offering similar facilities to other bidders and potential buyers.
Railtrack in administration may have an asset surplus or deficit. The administrators will work that out in due course. What is for sure is that if there is any asset surplus, it resides in the handsand is to the benefitof the shareholders of the group that owned the company before it went into administration.
It is now incumbent on the Secretary of State, as well as on the directors of the company and the administrator, to work to ensure that the proceeds of any onward sale or disposal of the company in administration are maximised. The way in which that can be done is crystal clear. The Government must set out the amount of money that they will offer the railways. They must also set out the regulatory framework, and guarantee that they will not change it unreasonably or unnecessarily. They must make a statement about what they want the railways to achieve and then, through the administrator, put the project out to bidders. In that way, we will be able to see who will produce the best result.
It is not the Secretary of State's job to think up a half-baked scheme for a company without equitya scheme that is meant to take the dividends out of profit making and, it is claimed, plough back what will probably be make-believe profits into the future of the railway. Effectively, the scheme is trying to freeze out other possible solutions that may be more profitable and successful, and more capable of levering in private finance.
I can see no way in which the Secretary of State's proposed company limited by guarantee could lever in anything like £34 billion in the early days, weeks or even years of its progress. Unless the Government change the flow of grant, subsidy and regulation, nor can I see any way for that company to be profitable and successful. It certainly will not be if the Secretary of State for Transport, Local Government and the Regions is, effectively, the shadow chairman or director of the whole enterprise, as the written answer implies that he wishes to be.
We learn through the press, but not from the Secretary of State, that the Government are looking for a chairman of the new enterprise, and that they will pay the princely sum of about £1 million a year. That is a very generous incentive, and it might be attractive to many people. However, any eventual office holder might be wise to ask the Government to pay the cash up front. As we have seen with Railtrack, the great danger is that the Government
Instead of offering danger money to see whether there is someone who can be tempted, the Government should think again about the whole project. They should say that a company limited by guarantee under these circumstances, with the stakeholders that they have in mind, is not going to work, and they should acknowledge that they have a duty to let the administrator put the company up for sale in the usual way. As far as winning back the trust of the British public in the railways is concerned, the Government should set out how much money they are going to offer, and on what basis they will offer it.
In my constituency of Wokingham, I was very close to getting the old Railtrack and other interested parties to agree on a project for a new station and a proper transport interchange. They are much needed. I am now told that the matter has been put on ice and that the administrator cannot make decisions about new projects because he is not sure how much money he will get, day by day, from the Government, or how much will be available in future for capital expenditure.
In March this year, the Railtrack accounts showed that capital expenditure to a value of £1.777 billion had been contracted for but not undertaken up to that point. Is that capital expenditure still going ahead, or will the Government renege on the contracts? If it is going ahead, will the Government stand behind it and make the money available? If the Government are not going to make the money available, how on earth do they think that that capital expenditure can be paid for? Why will they not come forward with plans that will allow them not only to undertake the capital expenditure of £1.777 billion, but to accomplish all the extra schemessuch as my scheme for Wokingham stationthat have not yet been agreed but were well advanced and in the pipeline?
The Labour party will rue the day that a Labour Secretary of State bankrupted a trading enterprise in the private sector. The Government's lack of belief in true public-private partnerships has been exposed. The Secretary of State's decision has raised the cost of capital for the railways, delayed capital expenditure and undermined what trust the City had in the Government's actions and inactions. Ministers have lost trust in all sorts of ways, but I suspect that the Secretary of State has lost trust most damagingly in the past week or two through his actions and antics with the railway industry. The future of that industry is now much grislier as a result.