Examination of Witnesses (Questions 140-159)|
MP AND DR
THURSDAY 22 NOVEMBER 2001
140. How are we doing against other growing
economies either in Europe or worldwide? Are other economies experiencing
similar difficulties, particularly those experiencing growth?
We have an economy that is growing substantially more rapidly
than many of our European competitors, are they performing any
better than us in terms of reducing car usage?
(Mr Byers) I think not. My understanding is, and certainly
the note I have got here shows, there is a trend in all developed
countries which is that road use is on the increase. Obviously
it will be at variable rates but there is clearly a trend in developed
countries that that is so.
141. Are we doing enough through the tax regime?
Clearly we have tried to look at reducing emissions through the
tax regime in terms of vehicle taxation, lower emission vehicles,
but do you think more could be done? Have you talked to the Chancellor
about doing more in terms of the taxation policy in that particular
(Dr Whitehead) That is already happening through the
implementation of reforms of Vehicle Excise Duty based on CO2
emissions of vehicles, changing company car taxation. Interestingly,
of course, again I mention in the context of people continuing
to drive vehicles, the issue is partly the question of what journeys
people do in the vehicles they already own, ie changing the relationship
between what journeys people do and the ownership. The question
of ownership is not necessarily the final indicator. The European
Commission's voluntary agreement with car manufacturers, which
Britain played a very important role in, is set to decrease CO2
emissions on 1995 levels by about 25 per cent by 2008-09. That
is a substantial contribution towards CO2 emission reduction within
the context of people continuing to drive vehicles.
142. Forgive me, Minister, but I do not think
you answered the question at all. Can I ask it in a different
way. One of the things the Secretary of State said earlier was
he had no desire to further penalise the motorist.
(Mr Byers) I did not say further penalise.
143. To penalise the motorist. That is quite
an interesting intermission, I would say, because one of the things
you want to do is to increase the benefit of public transport
to get people off the road by providing choice. Does that mean
that you will not be penalising the motorist, whether that is
the car motorist or commercial vehicles, any further than you
have done so already either by increasing fuel duty or other taxes
(Mr Byers) I think if I can just clarify the point
I was making. In all of these things, particularly in relation
to taxation, one must strike a balance because what we do not
want to get to is a situation where people feel any tax is one
which is unfair and they are being discriminated against because
of that tax being introduced. Whatever it is, whether it is fuel
duty or other taxes, a balance always has to be struck. There
is a level of tolerance beyond which people will not accept it
and we saw in September of last year people said "enough
is enough" and governments have to listen to that. I think
the changes that have been introduced as part of the normal budgetary
process have shown the Chancellor was able to reflect on their
concerns. That was the point I was trying to make. It is a straight
forward approach which is you can try and penalise or punish but
my own view is a better way is this one about offering real choice.
It is more challenging but I think it is one that is more acceptable.
144. Whilst I do not expect you to tell us,
if indeed you know, what the Pre-Budget Statement is going to
say next week, do I take it as a yes that there will be further
taxation on the motorist in this Parliament?
(Mr Byers) Matters of taxation are for the Chancellor
and for the normal Pre-Budget and Budget Reports. He keeps all
taxes under review and taxes can go down as well as up, they can
145. This is not an area where you have a concordat?
(Mr Byers) No.
146. Is that not a bit of a problem? After all,
it is terribly important, the link between the growth of the economy
and the growth of motor transport. You have had some success,
as indeed the previous Conservative Government had some success,
because of the Fuel Duty Escalator but now that has been scrapped.
(Mr Byers) I think most Members of this House, whatever
party they come from, supported the removal of the Fuel Duty Escalator
apart from, perhaps, the Liberal Democrats, and I am not sure
what their policy is, if they have got one, in this particular
147. I agree with you there. If you are having
a policy right across Government clearly the taxation of motorists,
as Mr Simmonds was saying, is a crucial part of that and if you
are kept out of the loop on that that is not an holistic approach.
(Mr Byers) I was not implying that we are kept out
of the loop. What I am saying is there is not a concordat on tax
matters but certainly the Chancellor consults and discusses these
issues with his Cabinet colleagues.
148. And you are one of them.
(Mr Byers) That is right, but we do that on a political
basis, not through a concordat. The Chancellor is acutely aware
of the question of the effect of any of his tax measures and he
is also a Chancellor who is keenly aware of the effect on the
environment. I think there are many measures which he has introduced
since 1997 which reflect that.
149. The Government's Ten Year Transport Plan,
which was published in July 2000, outlines a programme of public
and private funding of around about £180 billion, of which
about £132 billion is public. That leaves about £48
billion to come from the private sector. The bulk of that is for
use in the sphere of railways. Given the changing economic climate
and the recent experience with Railtrack, how sure are you now
that the Government will be able to attract the planned private
investment of £48 billion that the plan envisages?
(Mr Byers) You are absolutely right as far as the
figures are concerned, some £48 billion at least really from
the private sector coming in to support the Ten Year Plan. Within
that some £34 billion we expect to be private money going
into railways. What I would say, and it is something I have said
in the Chamber several times over the last few weeks, is that
in the meetings I have had with investors from the City, of which
I have had several over the last few weeks, they see a very clear
distinction between a privatisation with a quoted company, which
was Railtrack, and the investment made in an organisation like
that either as bond holders or as shareholders compared to a public-private
partnership approach, which is the model that we will be using
for much of the private investment coming in. In relation to railways
a lot of that investment will be through Special Purpose Vehicles
which will be free standing agreements entered into covering specific
enhancement projects, so, for example, on the East Coast Main
Line, which we want to begin to upgrade during the Ten Year Plan,
that will be done through a Special Purpose Vehicle which will
be Strategic Rail Authority, the Government and the private sector.
I have to say there is a lot of interest in the private sector
to be involved in these projects. They can see them as being quite
distinct and quite separate from the situation that applied to
Railtrack as a publicly quoted company.
150. I will come to the tube in a minute, if
I might, because I think there are particular issues there. If
at the end of the day people in the City are investing, which
is essentially what you are asking them to do if you are seeking
to raise money on the market, that money they are investing ultimately
belongs to someone and in very many cases it belongs to shareholders
in one form or another, whether they are investing individually
or taking a shareholding through group schemes like pension funds
or whatever it may be, and it is essential that these institutions
are looking after the needs of investors, as we all know. These
people can all read Hansard and given the way that you have approached
the aftermath of the administration of Railtrack where you have
taken, I think it is fair to say, a somewhat hostile attitude
towards shareholdersI do not think I am misrepresenting
you thereare you fully confident that this is not going
to have a material effect on the ability of the Government to
raise money on the markets in the future?
(Mr Byers) The situation is absolutely clear, which
is this: we have said really from day one, from October 7 when
Railtrack went into administration, by the way our Petition for
Administration not opposed by Railtrack, that shareholders are
entitled to the value which is there in Railtrack, and there will
be some value there to which shareholders will be entitled. The
hostility which the Conservative Party seems to be referring to
is my refusal not to put in additional taxpayers' money to compensate
the shareholders of Railtrack. We know the directors of Railtrack
have said they want to get £3.60 a share. To compensate to
that extent will mean a direct transfer from the taxpayers of
this country of over one billion pounds. That is money that will
come from schools, it will come from hospitals. We have said very
clearly we are not going to do that. Some people may see that
as hostility towards shareholders, but it is interesting to note
the Leader of the Conservative Party at Prime Minister's Questions
yesterday could not answer a straight forward question as to whether
or not it is the policy of the Conservative Party to offer that
level of compensation to the shareholders, and we still have not
got a reply to that. I think people need to be aware, Chairman,
that one billion pounds would pay the salaries of 25,000 nurses
and 20,000 teachers. We seem to have got to a position where the
Conservative Opposition are saying they would be quite happy for
that money to be used to compensate a quarter of a million shareholders
in Railtrack but we disagree, and that is the simple position.
151. Could I just ask on that point of what
you could get for one billion pounds, how many spin doctors would
one billion pounds employ?
(Mr Byers) We can continue this if you want, Chairman.
I am more than happy to.
Mr Francois: There is actually a serious medium
term point here, Secretary of State, about the ability of Government
to continue raising money on the markets to finance public sector
infrastructure transport projects in the light of what has happened.
I think that needs to be properly addressed. You have straight
batted it and said "I have spoken to these people and it
will not be a problem" but I think it is legitimate to say
that some of us do have concerns that were expressed in a number
of debates just a few weeks ago, so this is not something that
has just come up this afternoon, to be fair. Let us take the specific
example of the tube. You said earlier in your testimony to this
Committee that we do not yet have a tube network for the 21st
Century, and I think everyone here would agree with that. We need
investment going in to allow the tube to be upgraded, we would
all agree with that. There have been discussions going on for
four years to provide this new investment under a public-private
partnership, so-called, to upgrade the tube. In the middle of
all this the Central Line still does not work, the Jubilee Line
signalling is still a shambles. There have been four years of
talk about this and yet to all practical intents and purposes
nothing has happened.
Mr Savidge: Can we include what happened in
the previous 18 years?
152. This is a matter of fact. How can you say
that this will not make any difference at all when there have
been four years to try and bring on the tube scheme and still
there has been no success?
(Mr Byers) The position is that the Tube has suffered
from chronic under-investment for decades and it is a Victorian
system which really has not had the investment not just over the
last four years, and it is interesting that the Member chose four
years, but certainly going back for 20 years. One of the first
decisions I took as Secretary of State is that we would proceed
with the public-private partnership. I have to tell the honourable
gentleman that the financial institutions that are interested
in being involved in that are as enthusiastic about it today as
they were before 7 October when I petitioned for the administration
of Railtrack. What we will do, provided we achieve value for money,
and there will be an independent assessment and recommendations
to myself as Secretary of State as to whether or not the three
contracts do achieve value for money, then we will proceed with
the public-private partnership for each of those preferred bidders,
and the private sector is interested for the simple reason because
they can see a clear distinction between Railtrack as a failed
Conservative privatisation and the fact that it was publicly quoted
on the stock marketThe City walked away from Railtrack.
Three years ago a Railtrack share was worth £17. When it
went into administration they were worth £2.80. It was the
City that walked away from Railtrack. Railtrack could not raise
money in the bond market which was one of the reasons they had
to come to Government for additional funding. Investors can see
the difference between Railtrack and what will be a public-private
partnership where there will be a legally binding agreement that
Government will sign up to and they will sign up to which will
deliver the real improvements for the Underground that certainly
this Government wants to see.
153. We could go through the arguments but I
suspect some people would think that was inappropriate but what
I will say is coming back to the earlier discussions that we were
having about traffic, I think it is fair to draw this analogy:
four and a half years ago a statement about massively reducing
traffic; traffic goes up, four years of discussions about improving
the Tube, four years they have been talking about a public-private
partnership, that was my point, four years this has been the plan;
four years later nothing different. I think it is fair to say
that there is a great deal of scepticism about all of those great
plans and strategies which sound wonderful on paper but never
seem to come to fruition do they, Secretary of State?
(Mr Byers) They will. We are in an interesting situation
where when tough and difficult decisions were taken to make progress,
which has happened in relation to Railtrack, which is happening
in relation to the public private partnership on the Underground
and decisions that have been taken there, and some people are
very critical of them. I have taken them because I believe they
will make a real difference and if value for money is achieved
then the public private partnerships for the Underground will
be concluded early in the new calendar year and we will be able
to see the investment take place. We are talking about investment
when the programme is up and running of half a million a day in
each of the Tube lines. That is investment that will be going
in, £13 billion going into London Underground. It is a huge
amount of money. It is about £4,000 per household in London
that will be invested in London Underground. Those are improvements
that I want to see. When we secure those improvements, as we will,
then it will lead to people having the genuine choice of public
transport that I want to see. We are not there at the moment.
People feel compelled to drive but with a good public transport
system, good railways and good London Underground there will be
a real difference.
154. So you are saying the contracts will be
let in early 2002?
(Mr Byers) That is what we have said. This is already
on the record. Provided they achieve value for money, this is
not a dogmatic approach. If at the end of the negotiations they
do not achieve value for money then we will not proceed with them
and there will be an alternative we need to adopt, but at the
moment negotiations are going well and we expect a conclusion
early in the New Year.
155. As you said yourself, Secretary of State,
these questions of public investment in transport are very important
to all our constituents whatever political party we may represent,
to you as well as to us. What I understand you to be saying if
I have got you right is that you are not going to find things
more difficult in terms of raising the very large amount £48
billion, £34 billion of which is for railways, as a result
of either more difficult economic circumstances or what has happened
over Railtrack. You are saying to us, are you, that you do not
expect to find it more difficult to raise that money which you
have to raise to make these public transport systems work?
(Mr Byers) That is what I am saying.
156. Nor are you going to find it more expensive
to raise that money?
(Mr Byers) There are no indications that that will
be the case.
157. You do not expect, as things stand at the
momentremember you have to come back to this Committee
as you have done once already and I am asking you to think ahead
about what may happen in the future because our question to you
about this whole area is very critical, this whole business of
monitoring pollution CO2 reductions and it affects the day-to-day
lives of our constituentsthat it is going to be more difficult
to raise the private finance and it is not going to be more expensive?
(Mr Byers) There are no indications of that.
158. Obviously improving public transport is
going to be vital to the environmental effects. Could you tell
us whether your task has been made easier by the privatisation
of the railway system and the way in which it had been done or
might it have been easier if that had not happened in the first
(Mr Byers) There are some aspects of the privatisation
of railways which have worked well. If we look at investment in
the train operating companies that has been a successful consequence
of privatisation in my view and, indeed, in the view of the Government.
There are other aspects of the privatisation which have not worked
well. If one considers the position of Railtrack, it is worth
reminding ourselves that when the railways were originally privatised
in 1993 Railtrack was kept as a public sector body, for reasons
that I think most of us now understand. It was not until 1996
that the decision was taken to float Railtrack on the Stock Market
and that is when Railtrack began to hit real difficulties because
they had this conflict between the need to enhance shareholder
value and the need to run the track effectively and properly and
they were caught between the two.
159. That is not dissimilar to the TOCs?
(Mr Byers) No, the TOCs are in a better position because
the success of the TOCs is due to the fact they have a direct
relationship with the travelling public whereas Railtrack have
got a captive market which are the TOCs who have got to run their
carriages on rails. The thing about the TOCs is they want to make
rail travel attractive which is why punctuality to them is important,
good customer care is important, information, new rolling stock
are all important so that rail becomes an attractive proposition.