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6.18 pm

Clive Efford (Eltham): My right hon. Friend the Secretary of State was entirely right to take the public finance trough from under the Railtrack snout. His decision could be described as an admission of failure—failure to tame Railtrack, a monopoly created at the time of privatisation which separated track from trains. Since it was first created as a public body and later privatised, it has consistently failed to control its costs. More important was its failure to deliver on its obligation to provide an efficient and reliable network. The train operating companies will be relieved to know that their needs no longer have to play second fiddle to Railtrack's shareholders.

Railtrack was created in April 1994, and questions about its finances have existed ever since. That continued after privatisation in May 1996, despite assurances given by the then Tory Government. In 1995, there was concern about Railtrack's ability to meet its financial investment targets. In September 1996, the Rail Regulator introduced the "Network Management Statement", intended to ensure that Railtrack fulfilled its investment commitments, especially in regard to maintenance. In November 1996, half-year figures showed that Railtrack was underspending on maintenance and renewals. The regulator stated that that was wholly unacceptable. He repeated that again in the following January at a meeting with the directors of Railtrack and, again, in a letter responding to Save Our Railways. He said in that letter:

"As I said in December 1996 the current level of underspend"—

on maintenance and renewals—

"is wholly unacceptable."

In May 1997, Railtrack published a further amended network management statement. The regulator responded by calling for greater public accountability from Railtrack and stated that he intended to alter its license to ensure that that was delivered. His statement acknowledged that Railtrack was a monopoly and that the regulator must provide a system of controls such as those that would be expected of a competitive market. After May 1997, the newly elected Labour Government announced their intention to introduce a new regime for the regulator to increase Railtrack's accountability.

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There have been repeated reports of Railtrack's failures throughout its history. Numerous newspaper articles have warned everybody about the dangers of investing in Railtrack. As early as June 1996, The Economist discussed "The Railtrack Trap" and the arrangements to finance Railtrack that were set up by the Railways Act 1993. On 21 December 1996, The Daily Telegraph contained an article called "Watchdog in Attack on Railtrack Underspend." The Financial Times ran a series of articles early in 1997 with headlines such as "Railtrack Warned to Speed up Investment" and "Railtrack Investment Row Gets Up Steam". There is a catalogue of reports of Railtrack's failures.

We have had a constant stream of failures and attempts by the regulator and successive Governments to tame the Railtrack beast. However, all attempts failed because they tried to remould Railtrack into something that it was not set up to be. Public money was passed to private shareholders through a set up that was devised to do nothing but launder public money into private hands.

In April 2001, Railtrack received an extra £1.5 billion from the Government. Immediately, Railtrack used nearly £200 million of that to pay dividends to shareholders. The public's anger about privatisation is underlined by the Paddington and Hatfield crashes, which epitomise the effect of privatisation on our rail network. The public have no doubt where the blame lies. They know that profit was put before safety. That was epitomised when the former chairman of Railtrack sat with his colleagues in his office on the night of the Hatfield crash and emerged at 6 am to state that he was the only man to see Railtrack through the crisis. A few weeks later, he was handed £400,000 and he went out through the back door. It is clear that Railtrack was not set up to run an efficient railway, but was set up with only shareholders in mind.

On Second Reading of the Railways Bill in 1993, John McGregor, the then Secretary of State for Transport, said that the Bill was

"an historic change for the better in Britain's railway system."—[Official Report, 2 February 1993; Vol. 218, c. 156.]

He described Railtrack as an "entrenched monopoly" that had

"an instinctive tendency to ask for more taxpayers' subsidy and to feel that public subsidy will always be there as a crutch whenever things look difficult. Inevitably public ownership also brings with it the constraints of public finance, not least given the many competing demands on the public purse."—[Official Report, 2 February 1993; Vol. 218, c. 156.]

There is clearly not a competing demand on the public purse when public money is passed into private hands, but only when a public service is subsidised.

Railtrack has given us constant excuses for its failures to deliver. The Railways Act 1993 paved the way for rail privatisation. The first mention of the possibility of Railtrack's privatisation was made only in October 1992. If Opposition Members do not believe me, I am referring to a House research document that states that the first reference that was ever made to Railtrack's privatisation occurred in that month. However, an Act that effectively privatised Railtrack had been passed by the end of November 1993.

The reason for such undue haste is explained by a leaked memo from the then Chancellor, to which my right hon. Friend the Member for Oldham, West and Royton

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(Mr. Meacher), who is now Minister for the Environment, referred during an Opposition day debate on 18 October 1995. He said that the then Chancellor of the Exchequer wrote to the then Prime Minister to ask for Railtrack privatisation to be speeded up because it was

"integral to the Budget arithmetic."—[Official Report, 18 October 1995; Vol. 264, c. 358.]

We were treated to the Conservative Government's money-raising exercise to finance pre-election tax cuts. That is why Railtrack's privatisation was rushed and botched, and why we are debating the matter today.

Tom Winsor offered Railtrack an interim review, as he stated when he gave evidence to the Select Committee on Transport, Local Government and the Regions last week. From 15 January, it was open to Railtrack to go back to Tom Winsor to ask for an interim review of charges to access railways. It failed to accept that offer until the weekend of the meeting with the Secretary of State, when it asked for that interim review to be carried out in 24 hours over a weekend. Opposition Members' entire argument appears to hinge on that single fact, which is a thin thread on which to charge the Secretary of State with misleading shareholders and mishandling the affair.

My right hon. Friend the Secretary of State ended Railtrack's repeated failures. Public finances cannot continue to pour into the private sector at the expense of an efficient rail service. I support my right hon. Friend's actions, which I hope will lead to an efficient public rail service that the people of this country have the right to expect.

6.27 pm

Miss Anne McIntosh (Vale of York): I repeat, for the record, my declaration of interest. I hold shares in Railtrack, FirstGroup and Eurotunnel, and my husband works for an American airline company. Therefore, I share the sentiments of other hon. Members following yesterday's tragic plane crash and loss of life in New York.

Today, we have seen a classic case of the manipulation of evidence. It is time that the record spoke for itself. I especially refer to paragraph 765 of the evidence given by the Rail Regulator to the Select Committee on Transport, Local Government and the Regions last week. He said:

"I added that taking me under political control would go entirely against the grain of the major theme of the Government's policy position in the General Election campaign, which was about getting private sector capital into the provision of public services. I told them that such a step would do considerable harm to the ability of the Government to get companies to put money into public projects. I also mentioned the implications of the Human Rights Act 1968 because of the right of the citizen to have his civil rights determined by an impartial tribunal."

That was against the background of the Rail Regulator stipulating in a press statement on 12 June that Railtrack had the environment to confound its critics and to succeed.

The Rail Regulator told the Select Committee that when the Secretary of State told him that the Government had decided to put Railtrack into administration that weekend, he had said that he was

"very surprised at the circumstances as they explained them to me and the suddenness of the decision on railway administration. I explained that we at ORR had had no indication of any imminent insolvency from the company."

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In paragraph 761, Mr. Winsor notes:

"Mr Byers said that they had thought of that"—

an interim application from Railtrack—

"and that if such an application were made, he had the necessary authority immediately to introduce emergency legislation to entitle the Secretary of State to give instructions to the Regulator. After pausing to consider whether I had really heard what I had just heard, I asked whether that would be to over-rule me in an interim review or in relation to all my functions. Mr. Byers said that it would cover everything but that its first use would be in relation to an interim review which the Government did not want to proceed".

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