| Previous Section | Index | Home Page |
Railtrack
3.32 pm
Mrs. Theresa May (Maidenhead) (by private notice): To ask the Secretary of State for Transport, Local Government and the Regions if he will make a statement on the process of consultation and decision taking that led to Railtrack being put into administration.
The Secretary of State for Transport, Local Government and the Regions (Mr. Stephen Byers): On 2 April 2001, Railtrack asked the Government for help because of its pressing financial difficulties. The Government 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 l October 2001 in full—£337 million.
At the time of the April agreement, the Government felt that we should make it clear that our role was to support the railway network but that we should not be seen as acting as guarantor of individual companies or their shareholders. We therefore agreed with Railtrack a statement of principles. The first point in the statement states:
- "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".
In August, Railtrack's advisers came back to the Department and said simply that there were three options available; restructuring, renationalisation or, as they described it, receivership. Thus it was Railtrack's advisers who first raised the possibility of insolvency if no additional funding was made available by the Government. I immediately asked my officials to investigate the restructuring option, which involved the provision of more funding to Railtrack. Railtrack asked for funding from the Government to cover all its costs, plus a profit and a four-year suspension of regulation. 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. As I told the House on 15 October, in order to protect passengers' interests, it was clearly right to explore the need for railway administration on a contingency basis.
As part of this contingency planning, draft railway administration orders were drawn up. A draft of the rules was printed by The Stationery Office on 28 September. The rules were made when a copy of that document was signed by me on 6 October to indicate that I concurred in the making of the rules. They came into force on 7 October.
The allegedly leaked rules, as some have described them, were produced to the court as evidence on 7 October and laid before Parliament on 8 October. They formed part of the bundle of documents placed before the court and have been deposited in the Library of the House.
As regards the printing of the draft rules on 28 September, I have already made it clear to the House that since Railtrack plc's view was that administration was the likely outcome if the Government refused to provide further funding, I had to consider, on a contingency basis, how, if Railtrack plc were proved to be insolvent, I could ensure an orderly process resulting from administration without disruption of the railways. The drafting of the rules was finalised as part of this contingency exercise and a print of them was obtained from The Stationery Office, in case they should be needed. The order runs to some 71 pages. It could not be drawn up overnight once a decision had been taken. It had to be prepared on a contingency basis.
As I reported to the House on 15 October, we carried on discussions with Railtrack until 3 October, but there was no way out of the dilemma; either we gave a 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 I decided that no further Government funding should be made available to Railtrack. I decided that we could no longer give Railtrack a blank cheque.
I informed John Robinson, the chairman of Railtrack, immediately of my decision, and of my decision to petition the High Court for a railway administration order if the company were 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.
Railtrack was a creation of the Conservative party. Clearly, the Conservative party cannot come to terms with the fact that a failed Tory privatisation has been brought to an end by this Government. Railtrack represents much that was wrong with the Tory privatisation of the railways, with the travelling public seen as an inconvenience, getting in the way of the interests of shareholders. The time has come to put delivery to passengers before dividends to shareholders. That is what the Government have done.
Mrs. May: Although I am grateful to the Secretary of State for his response, we had heard most of it before. He has signally failed to answer adequately many questions that remain in the minds of passengers, staff and shareholders about the Government's handling of winding up Railtrack.
On 15 October, the Secretary of State made a statement in which he claimed that he had decided to put Railtrack into administration on Friday 5 October. Since then, as he has just confirmed, it has become clear that the relevant statutory instrument had been prepared in September and was published on 28 September—at least a week before the Secretary of State claims he made his decision.
There is a wealth of difference between assessing the implications of a decision, ascertaining what is necessary to make it and implementing it by using parliamentary
draftsmen and others. The information calls into question the timing of the Secretary of State's decision to wind up Railtrack and the validity of his statement to the House on 15 October. It suggests that staff and shareholders were misled.Sadly, when the Secretary of State had already decided to wind up Railtrack, thousands of its employees were investing more of their hard-earned savings in the company. For the Government to allow people to invest their annual dividend while they signed away the railways' future is at least morally questionable. It is now open to legal challenge, and staff and passengers face months of uncertainty.
The Secretary of State prays in aid the statement of principles that was agreed between the Government and Railtrack. I suggest that he considers the third principle, which makes it clear that the Government agreed that
- "The company . . . needs to receive sufficient Government funding, as determined by the Regulator."
There are other signs that the Government's decision was taken before 5 October. Will the Secretary of State confirm that the arrangement for the chairman of Railtrack to attend a meeting with him at 4.45 pm on Friday 5 October was made on the afternoon of the previous day, Thursday 4 October, and that Railtrack was told that the time of the meeting could not be changed and had to be after the market had closed? Does he agree that that means that Lord Falconer was wrong in his statement in another place on 31 October that
- "during the course of the afternoon the Secretary of State reviewed the papers, made up his mind and called immediately for the chairman of the board of the company"—[Official Report, House of Lords, 31 October 2001; Vol. 627, c. 1486.]?
The Secretary of State has admitted that administrators were first approached on 23 August. Will he publish the instructions that they were given then, and any changes to them that the Department subsequently made? When he decided that Railtrack was insolvent, did he take any account of the value of the stations that the company owns? Will he confirm that he was not able to proceed with winding up Railtrack without the authority of the Treasury and other Cabinet colleagues? When did he receive that authority? When was the Prime Minister's office made aware of his intention to put Railtrack into administration?
Will the Secretary of State confirm once and for all when he decided in principle to put Railtrack into administration? All the evidence suggests that the Secretary of State had decided to wind up Railtrack before the decision was announced to the company and the markets, and that the decision of 5 October related to the timing of the announcement and not to whether the company should be wound up.
We are not simply considering the Secretary of State's job but the credibility of the Government. Will the Secretary of State lay all anxieties to rest by agreeing to an independent public inquiry into the Government's handling of Railtrack?
As the pieces of the jigsaw come together, it appears that, far from the decision being made on the afternoon of 5 October, it was a drawn-out act of wilful destruction by the Secretary of State. It is clear that he has been bent on destroying Railtrack from the start. As a result, schemes will be delayed, investment postponed and the industry placed in a protracted period of stagnation. There is a huge obstacle in the way of future investment in the railways. That obstacle is the Secretary of State. He must go.
| Next Section
| Index | Home Page |