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5.25 pm

Mr. Kenneth Clarke (Rushcliffe): The Secretary of State was typically calm in the face of this afternoon's attack and the Back Benchers who came in to support him were extremely boisterous in that support. I am afraid that that merely arouses further my alarm about the future of the railways. I do not think that Labour Members appreciate just how much damage has been done. The blunders and behaviour of the Secretary of State will have lasting consequences which will be felt in more than one area.

One important area, which we have debated this afternoon, is the damage done to shareholders' interests. It is plain that the Secretary of State remains unrepentant.

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I am sure that it will be further explored not only in this debate but by the Financial Services Authority and, in due course, by the courts. The way in which the Secretary of State has behaved would bring considerable retribution on anyone in the private sector involved in the affairs of a publicly quoted company who behaved in such a way towards the markets and the company's owner.

The damage that is obviously not appreciated by the Secretary of State or by Labour Back Benchers is that done to the future prospects of the railways. We should remind ourselves that there is probably widespread agreement in the House that the dominant issue to be addressed is how we are to raise the vast amounts of investment required to modernise the railway system and provide the travelling public with what they require. There is a need for £35 billion of private investment, on top of which it is likely that a lot of public investment will be required. No one listening to this debate could appreciate that that statement is supposed to be agreed to by the Labour party with the same enthusiasm with which the Conservatives and Liberal Democrats endorse it.

In order to raise huge amounts of private investment, it is extremely important that the markets respond to the appeal and that the investment should be delivered in good time—parts of the railway network are probably deteriorating as we speak. It should also be delivered at reasonable cost to the taxpayer and the travelling public who have, in part, to service the return on that investment, and it must be invested efficiently to provide high quality service delivery to the public.

The Government have gone backwards on all those counts. The way in which they have treated Railtrack and handled the events of the past few weeks has gravely damaged the potential to raise that sum of money at all, let alone in time.

Dr. Pugh: Will the right hon. and learned Gentleman give way?

Mr. Clarke: No, because I am speaking to a strict time limit, otherwise I would do so with pleasure. I will touch on what the hon. Member for Bath (Mr. Foster) said in a few moments.

The Secretary of State's behaviour—his whole demeanour as well as his argument—shows me that he has learned nothing whatever either from his short time in office in this particular post or from the fact that the Government have, in more than four years, made remarkably little progress towards their ambition of getting the required private investment into the railways.

As the hon. Member for Bath said, the Secretary of State rushed into the decision. Looking at and listening to the Secretary of State, and it is the second time recently on this subject that I have done so, I think that he is enjoying it. I think that he thought that this would be a popular decision, which would play well with Labour Back Benchers. It is playing well with some of them, and I will come to that in a second—they will come to regret it.

Railtrack had been so vilified by members of the Government and their supporters that the right hon. Gentleman thought that insolvency would be greeted as a kind of public service, because fat cats who had caused accidents were being dispatched. I suspect that he even rushed out his announcement to ensure that it was not

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stolen from him by someone such as the Chancellor of the Exchequer, trying to take the credit for an announcement that was very popular with old Labour or those who still have some vestige of old Labour instincts.

The fact is that that instinct of the Secretary of State and of some of the hon. Members who have spoken is contrary to the Government's declared policy position. Since the moment when they came into office, the Government have never espoused the cause of renationalising the railways, because they know perfectly well that they have not the slightest prospect of raising the sums involved or of getting the quality of management that would be required if they ever reverted to a nationalised railway. Their policy is to make investment in the railways so attractive that it will continue to bring in the funds that are required.

I am genuinely indebted to the hon. Member for Bath, as I was not previously aware of the pamphlet that the Government published in their first term extolling the virtues of privatisation as it had progressed thus far, two years into office. The pamphlet needs to be commended to people such as the hon. Member for Weaver Vale (Mr. Hall), who is responding in the way in which the Secretary of State wants his Back Benchers to respond. He made a speech that he could have made before 1997 or when he was fighting the election that year. He still thinks that the whole point is to vilify the privatisation process and to suggest that making profits out of private investment in railways causes accidents and reduces the level of service to the public. However, that is completely contrary to the direction in which the Government wish to go.

As my hon. Friend the Member for Maidenhead (Mrs. May) pointed out, that argument is also completely contrary to the evidence and facts for the first two or three years. The Government's pamphlet was well supported by the evidence. Following privatisation, usage of the railway soared. Indeed, that turned out to be one of the problems, given the old-fashioned infrastructure. I think that passenger usage increased by about 35 per cent., although I am speaking from memory, for which I apologise. Freight usage increased by about 45 per cent., trains became more punctual and the safety record improved. Hence, the virtues of the approach were extolled to people overseas.

The Labour party never quite learned from that and still has not done so. It was hostile to privatisation and it hankers to go back to more public sector control. I think that the Prime Minister and the Chancellor of the Exchequer have adopted the principles of privatisation and the private finance initiative, but, alas, their party has never done so. Indeed, even some of their Ministers have never really adopted those principles and do not approve of them.

That is why the Secretary of State should be careful before he gets too happy about his fate this evening. He may have every confidence in the Government Whips or think that there are only small numbers in the Conservative party, and he may get favourable write-ups in sections of the press—however, no Cabinet Ministers are here. Understandably, there is no sign of the Prime Minister or the Chancellor of the Exchequer. If I were the Secretary of State, I would look out for them as soon as the first reshuffle occurs. I do not think they are pleased with his work, as something must be done to deliver improvement on the railways. That is meant to be the

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second-term duty of the Government, who say they want to deliver noticeable improvements in the quantity of public service, but, as hon. Members may gather, they have gone in the opposite direction and are gravely damaging the prospects of raising the private sector investment that they want.

The Deputy Prime Minister followed exactly the same pattern when he was responsible for these matters in the previous Parliament. He was hostile to the people with whom he should have been working from the moment when he took over responsibility for the railways. He enjoyed any discomfiture on the part of the companies or those who were responsible for them. He was inclined to intervene too much and to encourage over-regulation, which was one of the factors that inhibited the progress of the privatised railway companies. Of course, he found the same problem—he was attacking the companies that were supposed to be raising the capital that was necessary to deliver the Government's policy.

The actual disaster that hit the finances of all the privatised companies was the aftermath of the railway accidents. The Government ordered inquiries, whose results I accept. They discovered management errors of the sort that occur in all organisations. However, the Government were content to allow the conclusion to be drawn that privatisation was somehow causing the accidents. The politicisation of railway accidents quite obviously meant that the reaction to the Hatfield crash was wholly excessive. The whole network was closed down for months and the finances of Railtrack and the operating companies have never been able to recover from that blow. Yet sections of the Labour party rejoiced, because they thought that the reputation of privatisation was being damaged again by those consequences.

The present Secretary of State, in his short time in office, has sought to make matters worse. The operating companies have been offered shorter franchises, which make it less likely that they will be able to raise the capital for more modern rolling stock. He has got rid of the people who should be helping him. He sacked—in effect—Sir Alastair Morton, with whom I worked on developing the private finance initiative—now the Government's policy—in the first place. Sir Alastair Morton is a very difficult man to work with; that is why I used to have him there. He has fear of no one—he gives Ministers his own opinion, and he gives their officials his own opinion.

That was all wrong for new Labour, and the best public servant it had was sacked. He was replaced by other public servants who were also difficult. Tom Winsor, the Rail Regulator, is now at odds with the Government over his account of what happened. That is a matter of pure semantics, as my hon. Friend the Member for Maidstone said. [Hon. Members: "Maidenhead."] Yes; they are a little different. The idea is absurd that the independence of the regulator is intact, when a Secretary of State with a huge majority says that if the regulator seeks to intervene further, legislation will be passed to curb his powers. That was an absurd intervention on the powers of the regulator by the Secretary of State, designed to deliver his chosen objective—the closure of Railtrack.

The Secretary of State has fallen out with all those people. He must have had a say in the choice of the directors of Railtrack, with whom he is now at war. That

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goes on. Now he wants to put a not-for-profit company, which he is unable to explain, in a position in which the same shareholders will come back to put up the money again and put themselves at the mercy of his behaviour again.

I conclude with the point with which I began. I do not think that it has crossed the Secretary of State's mind to consider the damage that he has done to the future of the railways and to the service that is likely to be given to the travelling public.

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