Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 140-159)



Mr Wright

  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 field?
  (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.

Mr Simmonds

  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 on motorists?
  (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 be removed.


  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 area.

  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.

Mr Francois

  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 shareholders—I do not think I am misrepresenting you there—are 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.

Mr Barker

  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?

Mr Francois

  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 market—The 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 moment—remember 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 constituents—that 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.

Mr Savidge

  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 place?
  (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.

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