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Last year, Britain's railways carried over a billion passengers for the first time in 40 years. That is a significant measure of success, and one that has been achieved despite all the well-known difficulties facing the industry. In those 40 years, the railways have suffered from substantial under-investment year after year. That was especially so in the years leading up to and immediately after privatisation under Railtrack. The Government will set out their spending plans through to 2008 in the spending review this summer. In advance of that, we need to look at the progress made through the increased investment that is already being put in place but, at the same time, we must look at the structural and organisational changes that we need to allow the railways to improve performance. That will enable us, as the spending review decisions are made, to publish proposals in the summer for a new structure and organisation for Britain's railways.
Following the history of under-investment, as a first step it was necessary to put in place increased investment. In July 2000, therefore, the Government announced public investment of £33 billion over 10 years, doubling railways investment over a five-year period. Total investment in the four years to 2006 will be almost three times the investment at the time of privatisation. That investment is now beginning to make a difference, but it has become very clear that the scale of under-investment and inefficiency in our railways that built up over decades was far greater than anyone believed at the time. The Hatfield accident in October 2000 exposed the poor state of much of the railways infrastructure. When Network Rail took over from Railtrack in October 2002 and started to go through the books, it became increasingly clear that Railtrack either did not know or did not admit to the sheer scale of the problems that were building up. It also became very clear that Railtrack had lost control of its costs. It had farmed out much of its decision making on what work was done, and therefore on costs, to private contractors. As everyone knows, forecast costs on the west coast main line were totally unrealistic, rocketing from £2 billion to £13 billion in just five years.
The recent regulatory review published last December confirms that the cost of upkeep of Britain's railways is £1.5 billion a year more than was thought necessary just three years ago. The review implied that Network Rail inherited a business from Railtrack with unit costs substantially higher than they ought to be. Network Rail is tackling these inefficiencies and is working to bring costs down. Taxpayers and fare-paying passengers alike need to know that their money is being well spent and that increased spending will improve performance. Cost control is absolutely essential.
The £64 billion public and private investment announced in 2000 is making a difference. Over a third of train rolling stock is being replaced, half of it on London commuter lines. Major projects are being delivered, like the west coast main line upgrade and the power supply south of the Thames. There is track and
There remains a further and very serious difficulty facing the industrythat is, its structure and organisation. The way in which it was privatised has led to fragmentation, excessive complication and dysfunctionality that have compounded the problems caused by decades of under-investment. Quite simply, there are too many organisations, some with overlapping responsibilities, and it has become increasingly clear that that gets in the way of effective decision making and frequently leads to unnecessary wrangling and disputes. That is no way to run the railways.
The Government are committed to a partnership between public and private sectors. It happens on railways throughout the world. However, the long-term inefficiencies and costs of privatisation have, as time has passed, become an even bigger barrier to the success of the railways, so in the spirit of partnership between private and public sectors, we need to put right the problems that the authors of privatisation left behind. We need to build on that investment and on the structural changes we have already put in place, not only to put the railways on a sound financial footing, but at the same time to provide them with the right structure and organisation to take them through the next 20 or 30 years.
The Government will set out their spending proposals for transport at the conclusion of the spending review in the summer, but that money must be well spent now and in the future. It is essential, therefore, that the railways establish far greater cost control, so that the public and private investors know that it is efficiently and effectively run. Before they take on new projects, we need to be satisfied that there is proper control over existing costs and a significant improvement in performance. The public expect no less.
The Government remain committed to increasing spending on the railways because it is needed and because the railways are an essential part of the economic fabric of the country. Millions of people depend on it. The public rightly expect rigorous cost controlafter all, we all pay for the railways through taxes and fares. That work has already started. For example, Network Rail is taking maintenance back in-house to control costs, and it is looking at other areas where it can do things more cost-effectively. The regulator's review, which I welcomed in my written statement on 15 December, identified substantial cost reductions, but more can and must be done.
As a country, we must be able to make informed choices and decisions about rail and other forms of public transport. Too often these costs are far from transparent. The Government also believe that the opportunity should be taken to consider how we can devolve more decisions on public transport, including rail, to the Scottish Executive and Welsh Assembly Government and at a regional level to PTEspassenger transport executiveswithin a nationally coherent framework. Local transport decisions are often best
However, structural change is not just needed in order to make better spending decisions. It is also needed if rail is to operate effectively and to meet the needs of passengers and other customers. Privatisation had some disastrous and far-reaching consequences for the railwaysRailtrack's performance, for examplebut the private sector has brought considerable increased investment, and in many cases train companies have provided innovation that was conspicuously lacking in the past. We want to build on that.
That is why the Government believe that renationalisation would not solve the problems that the railways face. What is essential is to put in place a structure that works and can deliver not just cost control but safe, reliable railways that work efficiently.
Since 1997, we have put in place reforms to deal with some of the worst effects of privatisation. Richard Bowker and the Strategic Rail Authority have worked extremely hard with the industry, bringing greater leadership and strategic direction to the railways, and they do so with our full support. The SRA is making much-needed changes to franchising, planning and route development.
The Government remain committed to the minute that I laid before the House on 3 February 2003 covering obligations to the SRA, their other financial obligations and the Government's other contracts. As the House would expect, we will remain at least as closely involved in expenditure decisions and in financial commitments to the industry and those who finance it. However, what is needed are railways that make the most of what both private and public sectors can offer. The first stage of reform was to set up Network Rail, a private sector company operating in the public interest, and it is already making significant progress in improving the performance of the track and signalling and getting a grip on costs. It has a clear focus to operate in the public interest and build safe, reliable and efficient railways, and it will continue to do so.
We need to build on that, with more fundamental reform. The second stage is therefore to streamline the remaining structure of the railways and to examine the way in which the industry works together, and the Government will be publishing their proposals in the summer. Two key principles will underpin those reforms. First, the railways must operate in the public interest, while protecting the legitimate interests of investors. It must be for the Government to decide how much public money is spent on the railways and to determine priorities. Of course, no Government Department can or should attempt to operate the railways, but the Government can put in place a structure and organisation that can do that effectively and efficiently, with a single point of decision making. Rail privatisation failed to recognise that there are some things that only the Government can determine in the public interest and that cannot be left purely to commercial interests.
Secondly, the principle of public and private partnership is right for the railways and it will continue. It brings in money from two sources, and that is important. We are spending £73 million every week on the railways and that is levering in a similar amount from the private sector. That is why the principle of independent economic regulation for the railways is essential and will be central to our proposals.
In many cases, the train operating companies have brought innovation to services that was lacking in the past, but we need to put in place the right organisation and structure so that both public and private sectors can focus on meeting passengers' needs and delivering value for money. As rail also makes a valuable contribution to keeping lorries off the roads, we want to ensure freight operators have access to the rail network on fair terms. We need the right framework to ensure that the railways can operate effectively and so that key decisions can be taken in the best interest of passengers to provide a more reliable service.
Our objective is a streamlined structure and organisation with clear lines of responsibility and accountability. Network Rail is already operating in the public interest, and with the right franchising arrangements so should the train operators, but we have a clear responsibility to examine the roles and relationships of all the other organisations with a view to streamlining the present structure.
The review will therefore look at the regulation of safety, which at the moment is the responsibility of the Health and Safety Executive, the Health and Safety Commission and the Rail Safety and Standards Board. Safety is of paramount importance, and all those involved undoubtedly work hard to ensure safe railways, but there is now a plethora of industry standards, some of which are over-cautious or are being applied in an over-cautious way. Safety regulation needs to be focused on the real risks to passengers and employees and should not be an obstacle to providing reliable services. We need the right organisation to do that.
Our reforms must make the structure as simple and as straightforward as possible. The complex structure at privatisation has contributed to the daily frustrations of the public, many of which are shared by the dedicated and committed people across the country working to improve the railways and deliver better services.
There will be many in the industry with ideas for reform. I am asking Richard Bowker and the SRA to evaluate ideas as they come forward, and then to let me have advice based on industry views, so that we can take them fully into account in reaching conclusions on the review. In the meantime, the priorities for the industry must be continually to focus on driving up performance and reliability and getting a grip on costs.
Passengers are rightly impatient. Improvements have been made but more needs to be done. We are determined to bring to an end the problems caused by decades of under-investment, compounded by an ill-thought-out privatisation. Rebuilding Britain's railways needs a long-term commitment and we are determined to deliver that.