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Mr. Kenneth Clarke: For four years, the Government accepted that structure and the right hon. Gentleman well knew that it was on the basis of that structure that the shareholders had invested and held their shareholding. The only reason that he decided to legislate was to make the company go bust, at the expense of the shareholders. For four years, he had announced no intention of legislating.
Mr. Byers: It is clearly not the case that we were legislating to make the company go bust. The court was clear about that. Mr. Justice Lindsay, talking about the evidence that he had received from the chairman of Railtrack, commented:
"In his evidence to me Mr. Robinson accepted that without government support Railtrack was unable to pay its debts and that that had been true for a long time."
That was the situation: the company was unable to pay its debts. I decided as a matter of public policy that the Government would not bail out Railtrack with yet more public money.
To secure that public policy objective, I would have had to take legislation through this place and the House of Lords, but the Conservatives somehow find it grossly insulting that, when there is a change of Government, we want to do things differently. Well, we wanted to do things differently and we did. I believe that having a
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company to run the infrastructure that puts the interests of the public first is far better than having a company—Railtrack—which had a legal duty always to put its shareholders first. That was the fatal flaw in the Railtrack privatisation.
Mr. Winsor was robust in his approach to Railtrack, and it was for that reason that the company came to the Government and not to the rail regulator for an interim review—the route established by the Conservative Government when they were in office. Because the rail regulator was sending out such a clear message, the company decided to try to do a deal with the Government. I can understand why. A deal was done in April 2001, when £1.5 billion was brought forward in what was described as the endeavour settlement to assist Railtrack in its financial difficulties, largely as a result of Hatfield. A deal was done with the Government. The company pleaded poverty and £1.5 billion was made available. It is interesting that, within a month, £134 million of that sum had been given out in a dividend to Railtrack shareholders.
Another key point about the April settlement is that the Government made it clear that, although we would stand behind the railway industry, we would not stand behind individual companies and that shareholders needed to be aware of that fact. Unlike what the hon. Member for Rutland and Melton said, the Government were open about our approach to the railway industry. There were to be no more bail-outs. People learned lessons after the £1.5 billion in April and we hoped that that money would see Railtrack through, but the company told us that it needed more money.
Railtrack came to the Government in strictest confidence, however, so it was not something we could make public. The company wanted help but it told us about the position in confidence. The right hon. and learned Member for Rushcliffe will know from his outside interests that companies often approach the Government on a commercially confidential basis, which is not to be made public to the stock market or anybody else. That is what happened in that case and I make no apology for it. The matter was not something to be debated openly. A company was coming to the Government in private, in commercial confidentiality, saying, "We've got these problems. Can you help us out?". As a result, we held discussions, especially from 25 July, to try to resolve the difficulties that Railtrack faced. On 5 October, I had to decide whether to give more public money to Railtrack or tell the company that enough was enough and that, if it was insolvent, it should petition for administration.
The House debated the situation extensively in autumn 2001 and two distinct decisions were taken. On Friday 5 October, there was the decision to say no to extra finance for Railtrack. We paid all the money due to the company but nothing more. Then, on the basis of the advice I received on the Sunday morning, I agreed to petition for insolvency in line with my powers as Secretary of State.
Grant Shapps (Welwyn Hatfield) (Con):
The right hon. Gentleman has made great play of the fact that extra money was going to Railtrack, but will he answer
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the question that has been put several times this afternoon about whether an additional £14 billion of public money went to Network Rail?
Mr. Byers: We do not know whether it was additional because we do not know what the rail regulator might have decided in an interim review, so we cannot answer that question. However, we are now in a far better position with Network Rail, which can deliver in the public interest, as opposed to Railtrack, which had that fundamental flaw. The company was failing in management terms and it can also be argued that its structure and the way that it was set up—putting the interests of shareholders first—could not deliver for the railway. The performance figures show that the railways are on the mend. There still needs to be much improvement, but the structure that is in place and that is being built on by my right hon. Friend the Secretary of State is a far better one to deliver in the interests of the travelling public.
A specific point was made about the position of the rail regulator. Mr. Winsor was robust in his approach. He knew that I had to take legislation through this place and the House of Lords. That is why, when the Railtrack directors phoned him on the Saturday evening—incidentally, they said they were ringing him only for due diligence—he said that he could conduct an interim review, but that he did not have much time. He asked them when they wanted the money. They said, "By Monday." They wanted millions of pounds by Monday. That was the response of the Railtrack directors. Mr. Winsor indicated clearly that, although he could conduct a review, I would have to take the measure through this place and the House of Lords and that it would take time, but they did not want to know. They knew that the game was up and that Railtrack was a company that could not pay its way. For that reason, when the case got to the court on the Sunday, they waived the two-days' notice that was theirs. They could have delayed the whole thing by a couple of days to have proper conversations with the regulator. They did not do that, but waived their right to have another couple of days to try to get a deal with the rail regulator. They gave up—they did not want to know. That is what the Railtrack directors did in those circumstances.
Miss Anne McIntosh (Vale of York) (Con) rose—
Mr. Byers: Of course I give way to a former Railtrack shareholder.
Miss McIntosh: As the House will recall, I took evidence on this point—and, yes, as the right hon. Gentleman says, I held Railtrack shares at the time. Why did he threaten the rail regulator? Why did he not allow the rail regulator to use the powers that the House had vested in the rail regulator under the legislation? By not allowing the rail regulator to use those powers, what message does that send to regulators in other industries?
Mr. Byers:
I appreciate that the hon. Lady has only just come into the Chamber, but we have covered that issue extensively earlier in the debate. [Hon. Members: "Answer!"] I shall repeat it all if hon. Members want me to. It is a strange logic of what democracy is all about to suggest that, because a Conservative Government have
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created an edifice, a Labour Government cannot come in and change it. Yes, the hon. Lady is right: the Railways Act 1993 allowed the regulator to be in place. I indicated to the regulator that I would legislate if need be for powers to direct the regulator, but I did not need to legislate—in reality, there was no need to do so. That was the situation, but it is flawed logic to say that, somehow, a different Government cannot bring legislation before the House. Mr. Winsor was aware that legislation would be necessary, which is why he said, on the Saturday evening, "The Secretary of State has said that he wants to legislate, but that will take time. I can conduct an interim review while he tries to do so." I think that the hon. Member for Rutland and Melton made that point in relation to my speech in the House in November 2001.
Adam Afriyie: I have a very brief question for the right hon. Gentleman: why did he not act in the four years after a Labour Government were elected?
Mr. Byers: I was the Secretary of State only from 9 June and some people say that I acted far too quickly, but the Government did act. We were trying to make the structure work, but it became very clear that that simply was not the case. That is why I took the decision. It is interesting to read the view of Mr. Justice Lindsay in the High Court, where he was taken through the arguments about my conduct. He says:
"or the Department can be fairly criticised for anticipating that if there was to be no funding beyond Railtrack's legal entitlement then legislation might be needed to be sure that that important policy decision could not be undermined."
That was the view of the judge in the High Court case, and we are revisiting all the arguments that were heard in the High Court at the end of June and throughout July—but, no doubt, we will hear a few more now.
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