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Mr. Michael Howard (Folkestone and Hythe) (Con): The right hon. Member for North Tyneside (Mr. Byers) has just agreed.
Mr. Clarke: It is impossible to deny it: it is set out time and again as a given. There were 10 commandments, but one was the most important of all—"We must not have an honest Red Book; the public accounts should not reveal the truth about this creature we are going to set up called Network Rail"—and that had to determine everything. If the Chancellor had come here today, we might have had a go at him about this: given that he makes all these speeches about the need to have genuinely independent statistics of value and the importance of having an independent office, what on earth is he doing bullying the Office for National Statistics to reach, as it eventually did, the absurd decision—which no other statistician I know agrees with—that the current debts and liabilities of Network Rail should not be on the public balance sheet? The only reason the Chancellor is able to say that he is following his prudent borrowing rule is that £20 billion-worth or thereabouts of current Network Rail liabilities are shown as being in the private sector—at least, they are not included in the public debt and are never used when the Chancellor describes his actual fiscal position.
So the Government's first main motive was to keep any debt off the public accounts—that drove everything and virtually stopped any other solution being chosen. The second, and the one that caused all the concern after the case, was that they must get hold of the assets of Network Rail either free of charge or at minimum cost, at the expense of the shareholders. That is what makes this example of abuse of public power particularly bad. All of us politicians, and anybody with a concern for public life, wish to see Cabinet government, the independence of the civil service, and proper accountability to Parliament. Those are very important constitutional issues. Sometimes the victim is public interest generally, and the problem is one of the proper administration of affairs. In this case, people were the victims—the shareholders whose assets had to be acquired, at minimum cost. The shareholders—I will not repeat the quotes, as they have featured often in the debate—were treated with total contempt, even being described by the Chancellor of the Exchequer's special advisers as grannies who would lose their blouses. The special advisers did not often mention the railwaymen. Ninety per cent. of the staff of Network Rail had shares in their own company. They were the shareholders. Conservative Members have been accused of being more concerned about 250,000 shareholders than about the travelling public. A quarter of a million of our fellow citizens—not all of whom were small shareholders, but very many of whom were—were to have their assets taken from them at the very minimum cost to the Treasury. All these heaps of paper are taken up with constant contrivance to achieve that result.
Mr. Spellar:
Does the right hon. and learned Gentleman accept that the share price of Railtrack had dropped dramatically—to £2.80, as I recollect—as a
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result of the ineptness of the management? In fact, the shareholders got £2.50, having estimated in March that the actual value in the company was only 60p a share. How were they being robbed?
Mr. Clarke: They were obviously wrong in March. Everybody seems to have left to try to work out what assets would be available if the company was wound up. The price did go down to £2.80, which was below the level that the company had been floated at. It had at one time been £17. The fact is that we will never know what the value of the company would have been if the proper process had been followed. I shall turn to that in a moment.
This company was not insolvent. We do not know what would have happened if a proper financial review had been conducted, because the right hon. Member for North Tyneside did not allow it.
Mr. Clarke: I will give way in a moment, but I am about to move on to the key question, which the right hon. Gentleman has not answered. Before asking me his question, will he agree that the main aim was to get the company into insolvency—that is repeated time and again—and to get the assets at low value? Can he find any expression of concern for the shareholders in these documents, apart from the fear of class actions in the United States—the Government were very worried about the American shareholders, who are litigious—and the fear of the institutional shareholders, who decided to cut their losses and bale out? If he will answer that, I will answer whatever question he wishes to ask me.
Mr. Byers: I know that the right hon. and learned Gentleman—[Hon. Members: "Answer!"] I am going to answer his question in two parts. First, he should read the judgment to see what the judge says about the way in which the term "grannies" was used; he is very clear about that.—[Laughter.] It is interesting that Conservative Members have obviously not read the judgment.
Secondly, the right hon. and learned Gentleman—this is the point on which I tried to intervene on him—is saying that taxpayers' money should have been used to give value to Railtrack shareholders. He must recognise, as the architect of Railtrack, that the regulator gives taxpayers' money as a result of any interim review, so he is saying, on behalf of the Conservative party, that taxpayers' money should have been used to increase the value of Railtrack shareholders.
Mr. Clarke: On the first point, I concede that there are occasions when the word "grannies" can be used as a term of endearment, but it is not my interpretation that that was the tone being adopted by the Chancellor's special adviser.
On the second point, the right hon. Gentleman is misinterpreting what we are saying, as he and his right hon. and hon. Friends have done throughout the debate. We are not saying that if there had been a Conservative Government we would have put in a
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whole lot of money that the Labour party would not have put in. We are defending the then legal position of the independent regulator, which was undoubted. It was not for the Secretary of State to decide whether the company was solvent or received any income. We had legislated, I agree, for a situation whereby it was not a decision for the Secretary of State. The regulator had a statutory duty to make provision for these things. The whole basis upon which Railtrack had been floated was that of investment in the company by the shareholders. Of course the shareholders took a risk, but their measurement of that had to be based on what the judgment of the statutory regulator might be. That was the law—the right hon. Gentleman had made no attempt to change it. He acted because he feared that the powers of the regulator would stop him proceeding to his chosen route of insolvency.
Mr. Byers: Will the right hon. and learned Gentleman confirm that, in line with the structure that he helped to create, the trigger for the review would have been a request from Railtrack's directors? If so, will he concede that they made no such request?
Mr. Clarke: That is poor mitigation. The right hon. Gentleman is accused of a crime—I use the word loosely; he is accused of an offence—yet he says, "I now realise that I needn't have done it." It is surprising that Railtrack did not resist. As I shall show, it was offered the opportunity to resist but it did not take it. It amazed the Government and it slightly amazes me that Railtrack did not challenge the administrative order. The right hon. Gentleman did not expect that; that is not what he was warned it would do.
Let me make it clear again: I do not defend the board of Railtrack. Those who say that the shareholders and the travelling public have cause for complaint against the board of Railtrack have some grounds. It was in a lamentable state and I accept that any Government would have been obliged to consider restructuring the company to put it on a sounder footing, and to decide what had to be done to make the privatised railway, which the Government continue to run, work better. We are arguing about what they did and how they did it. They chose the route of insolvency and subsequently realised that they did not have the legal power to make the company insolvent because all the relevant powers were in the hands of a regulator.
The Government held all sorts of private discussions. The lady from the Treasury pointed out that the regulator was the truly wild card. We have heard about all the connotations and how it was made increasingly clear to the Government that the chosen route of insolvency could be stopped by Tom Winsor, the regulator. They were discussing his, not their powers. The then Secretary of State for Transport cooked up the idea of legislating to take away the regulator's powers to make any decisions about the company's financial state or to give it any financial support. That was catastrophic. The regulator's decisions determined 90 per cent. of Railtrack's revenue. The train operators paid it for the use of the track and the signalling, and the regulator determined the amount. He had wide powers to undertake a financial review. The Government
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decided to make the company insolvent because that was the cheapest way of proceeding, but suddenly became aware of the existence of a truly wild card—a guy who had the legal power to do something about it.
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