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3. Mr. Paul Burstow (Sutton and Cheam) (LD): What steps are being taken to reduce costs in the railway industry; and if he will make a statement. [159431]

4. John Barrett (Edinburgh, West) (LD): If he will make a statement on the steps being taken to reduce costs within the railway industry. [159432]

The Minister of State, Department for Transport (Dr. Kim Howells): Controlling costs is a key challenge facing the railways, and both the Government and the Office of the Rail Regulator have made that clear to rail companies. Over the past eight months or so, considerable progress has been made on getting a grip on costs and delivering greater efficiency, and the rail review is examining what can be done to accelerate that.

Mr. Burstow : Is it not time to have a look at the profits made by rolling stock companies and the charges that they impose on train operating companies for the hire of railway equipment? Is it right that £144,000 a year is paid for a two-coach Pacer, when it originally cost £350,000 to build and lasts for 20 years? Is it not time to include ROSCOs—the rolling stock companies—in the remit of the regulator so that their costs and the proportion of costs that they pass on to train operating companies and ultimately the taxpayer can also be looked at?

Dr. Howells: That is a good question, and it is certainly addressed in the rail review. I hope that the hon. Gentleman will acknowledge that, over the past seven years, ROSCOs have invested more than £4 billion in new rolling stock, and 4,000 carriages—about a third of the total UK fleet—have been replaced. We are interested in considering charges and profit margins to see how it might be possible to get better value out of our railways in general.

John Barrett: Will the Minister confirm that, in attempting to cut costs in the railway industry, safety will never be compromised, so that events such as Ladbroke Grove, Hatfield and Potters Bar will never happen again?

Dr. Howells: Yes. I appreciate the logic of the hon. Gentleman's question, but I find it curious, since the ethos of the railways has always been safety first, and it continues to be so. We should not be risk-averse as a society. There will always be risks involved in running the railways; we have to cut those risks down to an absolute minimum. The railway authorities are trying to do precisely that.

Clive Efford (Eltham) (Lab): On costs, will my hon. Friend look into the upgrade of the electricity supply on network south-east to ensure that we are getting value for money? I have been advised by the Strategic Rail Authority that even once the electricity supply is upgraded, we will not be able to run 12-car trains across the entire network throughout peak periods. If we do not plan for the long-term future, we may soon find ourselves unable to run longer trains or meet capacity needs. I urge him to look into that matter.

Dr. Howells: I will certainly look into it, although I have not heard the report myself. The absurdity of

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having leased and ordered huge amounts of new rolling stock without realising that it could not be run on the southern region because the electricity supply was not up to it has become a famous misdemeanour in the administration of the railways. We are spending £1 billion on upgrading the power supply to the southern region in the belief that it will enable us to run new and longer trains that will serve customers better.

Lawrie Quinn (Scarborough and Whitby) (Lab): Does my hon. Friend welcome the Strategic Rail Authority's recent announcement of its review of community rail partnerships such as that in my constituency between Whitby and Middlesbrough? Does he agree that that will drive down costs on the railways by re-establishing the important link between local communities and the railway industry?

Dr. Howells: Yes, I do. There are opportunities for all kinds of imaginative ways of running the railways better. Often, local circumstances dictate how best the railway should be run in that area, and a great deal can be done to tap the creative potential that is there to provide better service for customers.

John Thurso (Caithness, Sutherland and Easter Ross) (LD): Does the Minister agree that the amount of cost mismanagement on the rail system demonstrates incompetence on a monumental scale, especially as the number of bureaucrats involved in supervising and regulating the industry has increased fivefold in the past decade and the amount spent on consultants has tripled in one year? Who among all those bureaucrats and consultants is responsible for proper cost controls and internal audit? Is it the Strategic Railway Authority, Network Rail, the rail regulator or, ultimately, the Government? Where does the buck stop?

Dr. Howells: As the hon. Gentleman knows, the industry is administered in far too complex a way. There are too many chiefs, and the lines of command are too long and need to be shortened. We must be able to make decisions—very often, vital decisions—much more quickly to produce a better railway. The Office of the Rail Regulator has identified £5 billion-worth of savings. However, the hon. Gentleman is right to highlight the confusion that exists. When I came into this job last July, the cost of the west coast mainline upgrade was about £14 billion. It began at £2 billion, and is now down to about £7.5 billion. Those cost predictions are flexible, by any standards. We are getting a grip on the situation, but that should have happened long before last summer.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich) (Lab): My hon. Friend knows that Network Rail tries hard to get control over costs and it should be encouraged to do that. However, there is still too much fragmentation. Will he ensure that Network Rail has access to a sensible set of costs and that contractors are told that the days of fleecing the taxpayer are over?

Dr. Howells: Yes. Network Rail's decision to take maintenance contracts in-house is a good start that will probably save the taxpayer approximately £300 million a year. More important, it will get the work done more

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efficiently and probably to higher standards. That is good news for those who use the railways and will lead to building up a skills base in Network Rail. That will be useful to the organisation in future.

Mr. Christopher Chope (Christchurch) (Con): Is the Minister thereby apologising for the fact that since 1997, the cost of providing our railways has trebled? Does he agree with this week's report from Transport 2000 that much of the extra money

Dr. Howells: We have discussed the matter several times and I am sure that the hon. Gentleman, who is generous, will admit that we inherited a ramshackle vehicle in the form of Railtrack and a system that was fatally flawed. We are trying to create a much better railway system. That will take some doing because he was right about the grave flaws, some of which continue to exist. We have tried to tackle them in the past seven years but there is no question that we have not been entirely successful. If that sounds like an apology, I hope that he will accept it.

Mrs. Ann Cryer (Keighley) (Lab) rose—

Mr. Speaker: Order. I shall call the hon. Member for Christchurch (Mr. Chope) again.

Mr. Chope: Thank you, Mr. Speaker. I have two goes today.

Does the Minister accept that the reason for the delay in publishing the National Audit Office report, which is out today, is the huge scale and gravity of the waste of taxpayers' money that it has uncovered? Does he further accept that it is time for the Government to learn the lesson, "Waste not, want not"? Is not it apparent from his previous answer that the Government inherited railway costs that are one third of current costs?

Dr. Howells: It is true that costs were one third of current costs. They have increased by so much because there had been no investment in the railways before we took them over. That was proved when the terrible accident occurred at Hatfield, and Railtrack—the company that the Conservative Government set up—had no idea of its asset base. When we began to realise the number of broken rails and the extent of repair that was needed to the infrastructure, we understood that the railways needed investment. The Government are doing precisely that for the first time in 30 years.

Mrs. Cryer: The economy is booming, especially in cities such as Leeds, which acts as a magnet and draws in an ever increasing number of commuters from areas such as mine. Does my hon. Friend agree that, while we need to cut the profits of the ROSCOs, which were a result of privatisation, we should try to run more trains and strengthen provision for people such as those in my constituency who use the Airedale and Wharfedale lines?

Dr. Howells: I am sure that we could run more trains on the Airedale and Wharfedale line. Last week, I had the privilege of visiting Japan, where rail infrastructure

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is 25 per cent. greater than ours. It has 20,000 km of track whereas we have 16,000 km. Last year, the railways in this country carried 1 billion passengers—the highest number since 1961—but the Japanese carried 21.7 billion. We ought to be able to squeeze much more capacity out of our railways. We have much to learn from the Japanese and we had better start learning it.

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