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Mr. Stringer: I have listened carefully to the hon. Gentleman's arguments. Is he really saying that he is satisfied with a situation in which, over the past two or three years, the rail regulator has been able to add £7 billion in expenditure to the public purse without any recourse to the Government? If he is not saying that, what is he saying?
Mr. Yeo: I am pointing out the consequences of the Bill. We are here to debate its Second Reading, and I am highlighting the areas about which the Opposition are concerned, which we shall seek to improve in Committee. The consequences of the proposal to allow the Secretary of State to overrule any recommendations from the Office of Rail Regulation will be quite serious, and we need to understand what they will be. The Secretary of State himself stated on 9 February that the Government
"maintaining fully effective and independent economic regulation is critical for retaining investor confidence. There will be no diminution in the regulatory protection of the private sector investors in the railway."—[Official Report, 9 February 2004; Vol. 417, c.1237W.]
Just how that statement to Parliament can be reconciled with schedule 4 will be examined in more detail in Committee; just what its effects might be on future private investment in the railways may take rather longer to be revealed.
Mrs. Dunwoody: Will the hon. Gentleman simply answer the question? Does he really think that the taxpayer should have no protection at all?
Mr. Yeo: I am not suggesting that the taxpayer should have no protection. I am suggesting that when the Government effectively go back on an assurance to Parliament, the resulting instability makes it harder to attract the investment that the railways need if they are to be brought up to date.
My worries about the Bill are reflected in the Opposition amendment. While we recognise the need for the Government to reverse the mistake that it made in setting up the Strategic Rail Authority four years ago, we remain concerned about the impact that the Bill will have on the future of the railways. Even in the darkest hours of British Rail, even when state control of the railways was unquestioned, there was never a time when quite so much power was seized by the Secretary of State and his civil servants in the Department.
Following the SRA's demise, just who will have any duty or incentive to promote rail travel? Not the Secretary of State, not the Department's civil servants, not Network Rail, not even Ken Livingstone.
We will pursue our objections to the Bill in Committee and during its later parliamentary stages. As a regular user of trains all over Britain, I believe passionately in their future. I believe that their role in providing environmentally friendly, sustainable transport for freight, commuters and long-distance inter-city travellers could and should grow. I believe that that end can be achieved with far less taxpayer subsidy than is being poured into the railways now. I also believe that it will be achieved only if we draw in more private investment through intensive exploitation of the enormous assets of the rail network, if we allow train operators the freedom that they need to respond to consumer demand, and if we take politicians and officials in the Department and in London right out of the running of the railways—if, in fact, we do the exact opposite of what the Government now propose.
The difference between the Secretary of State and me is that I want our railways to succeed and believe that left alone they can do so, whereas the Secretary of State does not mind whether they succeed or not, but does want to make sure that if they fail, he does not get the blame. Tragically, if they do fail—which will be much more likely if the Bill is passed unamended—it will not be the Secretary of State or the Government who pay the price, but the travelling public and the British economy.
I commend our amendment to the House.
5.38 pm
Mr. Kelvin Hopkins (Luton, North) (Lab):
I am almost aghast when I consider where to start. The hon. Member for South Suffolk (Mr. Yeo) sounded to me like the leader of a gang of vandals blaming those trying to clear up the mess for creating it in the first place. I have my own speech to make, but I could spend an hour or so simply responding to what I have just heard.
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I welcome the Bill in so far as it is another significant step away from the disasters of privatisation and back towards the sanity of public ownership of Britain's railways. I believe that it is a staging post towards transfer of power from the SRA to the Secretary of State, and towards public accountability. There are those who are concerned about that prospect because, although Ministers are known to be committed to the railways, the Department does not have a glorious record for supporting the railways. I hope that it has had a change of heart, and that it now has officials who are dedicated to the railways—as, indeed, am I. I speak as one who has travelled to work by rail every day for 35 years, and I have a considerable interest in railways, not just because I am a commuter but because I think that they are a vital part of our economy. Our economy could not operate without our railways. Indeed, I think that they should be expanded, to the benefit of us all.
There are ongoing concerns. Indeed, there are concerns about the Bill, but we should dwell on what has happened since privatisation, because that is where the problem has lain. The costs to the Exchequer have been enormous. Public subsidies per journey have been multiplied by five in 10 years, and track renewal costs have been multiplied by four. In British Rail's time, the average cost of a mile of rail track was about £350,000. It is now between £1.5 million and £2 million. That is way beyond inflation; even if one takes account of inflation, the cost is at least three times higher than it was.
Non-rolling stock investment has risen from about £1 billion 10 years ago to nearly £5 billion. I only wish that output had risen by the same amount. At that time there was a system for measuring output called CRWS. I cannot remember what the acronym stands for, but it was developed by BR to keep careful control of costs and ensure that it was getting value for money. That was conveniently junked by Railtrack when it took over, because it thought that markets and competition would take care of efficiency. How wrong it was.
The privateers have, effectively, been ripping off the taxpayer with a complex network of overlapping and interlocking companies paying each other out of public money. The Treasury has been treated as a milch cow by the private companies, and that is where the money has gone.
Let us look at some examples of how the scams operate. There are lots of agencies hiring staff to companies in the industry. Typically, an engineer may be paid £100 to £150 a day, but the agency hiring to the subcontractor will charge three times that amount, just pocketing the cash. A bridge should have cost £3 million to build but the charge was £12 million. The old BR engineers who know how much such things should cost were kept well away from the scheme, as was anyone who had anything to do with Government or the Treasury. Companies want to make sure that they get their money.
There are frequent press reports about the proportion of profit made by rolling stock leasing companies. Typically, there is a 30 per cent. leasing charge for rolling stock. As the money eventually comes out of the public purse or from the fare payer, they are not particularly worried, but 30 per cent. return for a leasing contract is outrageous—and as I have said, track renewal costs are now four times as high as they were.
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What happens when a contract is undertaken? The company takes the specification and works rigidly to that specification, even if it is wrong and it can see that there are little mistakes, because it knows that it will be inspected, the mistakes will be found and it will get another contract to put right the mistakes that it failed to deal with in the first contract. It is making money—why should it worry?
Contrast that with the days of BR, when track work was undertaken by direct employees working to tight cash limits and making necessary corrections when jobs were in process. The recently published Catalyst report suggests that Britain's railways, far from being inefficient, were the most efficient in Europe. There was under-investment and they were under-financed, but they were efficient. They had the lowest subsidy, but the highest productivity. One can have high productivity in an under-invested company, because to keep the show on the road, it has to operate efficiently. That is what the railways used to do.
The shadow Minister said something recently about "ramshackle" BR—but Tom Winsor, the rail regulator, said in my hearing in the past year that BR handed over the industry to the privateers "in good order". Despite decades of under-investment, it was in good order. Engineers and people who worked directly in the industry really cared about what was happening. Contrast that with what happens now.
Public ownership worked and privatisation does not. Under public ownership, there was direct employment. We saw the integration of operations and track work. The cash limits made a real difference. At the time, perhaps we did not like cash limits because they made life more difficult, but we have engineers in the other place who say that they worked ingeniously to use the money as best they could to ensure that they did the best possible job within the cash limit.
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