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Mr. Jeremy Hunt (South-West Surrey) (Con): This really will not do. My hon. Friends the Members for Buckingham (John Bercow), for Grantham and Stamford (Mr. Davies) and for Windsor (Adam Afriyie) asked the Secretary of State whether it is acceptable for a senior Treasury official to describe Railtrack investors as grannies and to say that it does not matter if the grannies lose their blouses. Is that acceptableyes or no?
Mr. Darling: Is not it amazing that, in the face of the facts, Conservative Members have to depart from their central case? The facts are that the company was insolvent, it was badly managed and the Government were absolutely right to put in place contingency plans.
I want to come to the regulatory point, of which the hon. Member for Rutland and Melton made much. By way of background, it is worth bearing it in mind that the regulator himself had been quite critical of Railtrack. In the summer of 2001, he gave a speech that caused some consternation in Railtrack. He said:
"Railtrack should put away the begging bowl, and stop spending valuable management time hawking themselves . . . round Whitehall, and knuckle down to getting train services back to a sustainable level of reliability and quality of service."
That was the regulator's starting point. He felt that Railtrack should be getting on with the job and with the settlement that he had made. However, the question of whether my right hon. Friend the Member for North Tyneside was right in ruling out a further regulatory review was considered by the judge. He said:
"or the Department can be fairly criticised for anticipating that if there was to be no funding beyond Railtrack's present legal entitlement then legislation might be needed to be sure that that important policy decision could not be undermined. I see no ground for any material inference against Mr. Byers."
"had good public reasons for the policy, as I hold he had, I do not see it as a fault in him . . . to have said that if necessary he would ask Parliament to legislate so that the policy could not be thwarted."
The regulator made it clear that there was no prospect of being able to find the amount of money that the company needed, more or less over the weekend. Indeed, as the judge said, remarkably, Railtrack said that, unless the regulator could promise an unspecified number of millions of pounds on the Monday, there would be no point in having an interim review. In other words, the interim review could not have provided the lifeline that the Conservatives believe that Railtrack could have received.
Therefore, first, did the then Secretary of State act properly? Yes, he did. Mr. Justice Lindsay looked at that and found he acted appropriately. Secondly, as both the regulator himself and Mr. Justice Lindsay observe, even if there had been a regulatory review, it would not have helped Railtrack because its financial position was so bad that at that stage it would not have saved them.
Our case is not that the Railtrack directors acted impeccably. There is agreement about most of the criticisms of the Railtrack directors, but none of the criticisms from anyone else said that the company was insolvent. Only the independent regulator could determine that, and the Government threatened to legislate to stop him intervening because they wanted to make it insolvent. All the other charges against Railtrack may stand, but the insolvency and the cost to the shareholders are down to the Government and the then Secretary of State and his colleagues.
I do not know whether the right hon. and learned Gentleman has read the judgment, but if he has he will know that it was the company itself that was
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outlining its financial difficulties and the company itself that said there would be questions about whether it could continue as a going concern. It is an important point, even to the remains of the Opposition's discredited case, that throughout 2001 the company was constantly asking itself whether it could continue to trade as a going concern, such was the state of its financial position. The Conservatives' position appears to be that, if only an interim review had been allowed, the regulator would have produced millions of pounds, for which Railtrack had asked earlier in the summer. Money would have to have come from the taxpayerit could have come from nowhere elseto save the company.
Looking through the papers, one is struck by how, earlier in the year, when my right hon. Friend the Member for North Tyneside became Secretary of State, he foresaw no structural change taking place in the industry. At that time, he had no reason to believe that Railtrack was in such a state. It is all in the papers available at the Departmentall the papers lodged with the court are available to be inspected by anyone who wants them. The judge made the point that the Department had made a full disclosure, as the House would expect.
I simply do not accept the proposition that, right from the start, the Government aimed to bring about Railtrack's insolvency. The Government did not do that. The first hint of financial problems came from the company itself in March, when it said that its shares were worth a fraction of the price at which they were trading. In each visit that Mr. Robinson and his colleagues paid throughout the summer, it was made clear that the company had deep management and financial problems. The Opposition case seems to be that the Government should have ignored all that and said to the company, "Have another regulatory review, have some more taxpayers' money", which is an extraordinary position to take.
Mr. Clarke: The Secretary of State is being extremely generous in giving way to me. Will he say why the Government threatened to legislate to take away the regulator's powers? Surely their only motive was their fear that the regulator would offer financial support and stop the insolvency that was the Government's objective, as all the papers make clear.
Mr. Darling: As the right hon. and learned Gentleman knows, because he interrupted me, a few moments ago I quoted Mr. Justice Lindsay saying that a policy decision was taken, so it was entirely understandable that the Secretary of State did not want that decision to be undermined by a further regulatory review.
The difference between us and the Opposition is becoming clear. It seems to be common ground that the company had big financial problems and was not well
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managed. The difference is that the Opposition think that the Government should have allowed an interim review and given more public money to a company that was in desperate straits. If that is what their case comes down to, I am happy that the public should judge us. We acted entirely appropriately in reaching the decision that the company could not be saved and that it was necessary to take appropriate steps to put a fresh administration in place after Railtrack had gone.
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