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Baroness Miller of Hendon: My Lords, I was reading quickly. I believe I said that I could not accept the noble Lord's description. I did not use the words, "We are perfectly happy", but the noble Lord said that it was absolutely useless, or something to that effect. I said that I did not accept that. I think we will leave it at that.
The noble Lord, Lord Ezra, suggested that there should be just one energy regulator. There is of course an inter-relationship between the energy markets, and the present regulators work closely together. The major changes in prospect in the gas and electricity markets require the undivided attention of specialist regulators to assist the transition to competitive markets in 1998. After 1998 of course there may be stronger logic in having one regulator and one consumer body for those markets.
The noble Lord, Lord Ezra, suggested also that the reform proposals amount to aligning UK rules with EC competition laws. Although it is proposed that the new prohibition on anti-competitive agreements is along similar lines to the EC prohibition contained in Article 85 of the EC Treaty--a prohibition which, as I said, has been adopted by many OECD countries--the Government have been consulting on how to introduce reform which will best suit our national circumstances. We are not just seeking harmonisation within the EC for harmonisation's sake.
Several noble Lords pointed to the criticism that domestic consumers gain least of all from utility privatisations. The noble Baroness, Lady Lockwood, was selective in the example she gave of how bad it was for consumers. If I had time, I could give many of the benefits of the other privatised utilities. However, the initial thrust of competition has been directed towards the larger customers. They have benefited substantially. Since privatisation, industrial gas prices are down 48 per cent. in real terms, while electricity prices are down 11 per cent.
Competition is growing for both business and domestic customers in telecommunications where prices are down about 40 per cent. since privatisation. I have many examples of benefits in the domestic market, but I shall pass on because we do not have time for them.
The noble Lord, Lord Borrie, and my noble friend Lady Wilcox, draw on great experience within the area of consumer policy. As the noble Baroness, Lady Seear, said, we are all consumers. Consumer policy cannot be seen in isolation from our initiatives to promote competition in domestic markets and overseas. It is the stimulus of competition which will be the most effective guardian of the general consumer interest over the longer term. The Government recognise that consumer confidence is also vital.
Consumers need to have the legal rights necessary to ensure that contracts are fair and enforceable. In order to do that, the Government promote better information for consumers to help them make informed choices. We also support voluntary arrangements where they can be effective in promoting best practice for consumers. On the other hand, as the noble Lord, Lord Borrie, and my noble friend Lady Wilcox said, the world is not a perfect place. We do not hesitate to use legislation and formal regulation to protect consumer interests where that proves to be necessary.
As the noble Lords, Lord Borrie and Lord Ezra, have said, the trading standards service plays a vital role in protecting consumers by ensuring compliance with the regulations by businesses. By providing an important advisory information service, it assists consumers to make an informed choice, and of course businesses also benefit.
The noble Lord, Lord Haskel, drew attention to the need for good regulation. We agree. By good regulation we mean regulation in which the costs arising are outweighed by the benefits. That is why the Government now require all regulatory proposals to be assessed for their costs as well as for their benefits.
My noble friend Lord Dixon-Smith suggested that ethics are better than regulation as a protection for the customer. The Government believe that there must be a framework of legislation which provides necessary protection for the public. The purpose of the deregulation initiative is to ensure that departments adopt a more rigorous approach to regulation. That means undertaking a thorough analysis of regulatory proposals to ensure that the benefits justify the costs and all those affected by the proposed regulations have an opportunity to comment.
The noble Lord, Lord Blease, referred to the General Consumer Council of Northern Ireland. We agree that it works well. Here we have the National Consumer Council and the Office of Fair Trading as a fair balance.
This has been a stimulating occasion. The Government are certainly not complacent about the challenges facing them in ensuring that the regulatory system allows business to thrive while ensuring a proper level of protection for consumers. We certainly do not dismiss the need for adequate regulation.
When it comes to protecting the consumers' interest, regulation will often be a blunt instrument in comparison to the rapier-like qualities of competition. It is, I am sure, vigorous competition which will serve as the best guarantee of the consumers' interest, and it is competition which the Government have consistently and successfully striven to promote within the British economy over the past 17 years.
There are just two things I should like her to take beyond today's proceedings. The first is to suggest that the important consultation paper that the Government have produced has not been mentioned adequately. I wonder whether the Minister would take away the suggestion made by my noble friend Lord Peston that the Government might find time for a debate on that subject so that the Government's consultation process will have the benefit of having included within it the thoughts of Members of this House.
The other matter that I would like the Minister to consider was raised by the noble Baroness, Lady Seear, in relation to the structure of MAFF and its attempt to represent industrial farming interests as well as those of the consumer, about which many of us are concerned, and the structure of the regulatory bodies for the privatised industries. A number of noble Lords have mentioned the words "profusion" and "proliferation". Obviously, as the structure of the industry changes the old regulatory structure may no longer be appropriate.
The noble Lord said: My Lords, I wish to mention at the outset that the final Railtrack prospectus was not available in this House until late yesterday afternoon. I regret that because Ministers have said that there were disparities between what was said in the pathfinder prospectus and in the final prospectus. It is a little difficult to search through more than 250 pages in order to find those disparities.
This Government are purblind to the disenchantment, indeed the antagonism, of the electorate towards them. They are unable to comprehend the messages of the Staffordshire South-East by-election and the council elections. They plough on with their discredited policies, pursing their own course of self-destruction. Privatisation, or rather the fragmentation, of the railways plays a significant part in all of that.
Of course, while that may redound to the electoral advantage of the Opposition, my case is that privatisation is against the interests of the nation and of the transport system in particular. There are better ways of dealing with the chronic underinvestment in the railways. No doubt today the Minister will assert that many people are expressing interest in Railtrack shares. But he would be very unwise to equate the readiness of
I wish to deal first with the contradictions that have accompanied the proposals to privatise Railtrack. I believe that it is a company which is being privatised before it is ready on any showing. What have been omitted from the prospectus are the assertions which were made repeatedly by Ministers in this House and another place during the passage of the Railways Bill in 1993 that the Government had no intention of privatising Railtrack in advance of British Railways.
Ministers said that there would be no share options for Railtrack directors. The latest assertion was on 23rd October last year. Now we discover that directors are to double their salaries--that is not unexpected because it usually happens, and I suppose that "doubling" the salary is to put it pretty low--and that that will be paid in shares. That is the complete reverse of what Ministers said.
My noble friend Lord Carmichael will recall that during our long debates we were told repeatedly that there would be no problems about a unified timetable. Then we had the fiasco of a 400-page revision due to errors and a further 91-page correction due to further errors. What did all that mess cost?
Without any or any proper explanation, they deliberately misled Parliament, just as with such bad grace they accepted an amendment of this House to enable British Rail to bid for franchises. The result, however, is that British Rail has been denied the opportunity and we have a French water company instead.
We have a motley group of bidders, some of whom are distinctly dubious. Stagecoach, for example, is a company which has had 22 references made against it to the Monopolies and Mergers Commission. Compagnie Generale des Eaux, the French water company to which I have referred, was described by a French judge as one of the two most corrupt companies in France. As for Resurgence Railways, Ministers were happy to surrender Great Western to a failed double glazing salesman. Had it not been for the vigilance of the Opposition that bid is unlikely to have been thrown out and Great Western management able to take over.
James Sherwood--I do not class him with the others--a short time before being handed the East Coast mainline said that the franchising formula was a formula for a no-investment railway. Is that to be his formula? We must remember that that line was so successful under public ownership that it cross-subsidised the rest of the InterCity network.
All those companies realise that what the Government have done in collusion with Mr. Horton, whose track record in BP was hardly enlightening and successful, is to turn Railtrack into what is essentially a property company. That is how it has been described in seeking to sell the company. A share shop described it in the following terms:
To conjure up interest in the Government's flawed policies of fragmenting the railway system they have chosen to resort to some pretty questionable tactics, including the issue of a prospectus which in a number of material respects is misleading. I invite the House to consider only some of the dodges. The overall cost of preparing for privatisation of Railtrack has been more than £1 billion. Not a single new railway line, not a single new signalling unit, not a piece of extra track and not a single new train has arisen from that. The subsidies to be paid by the taxpayers to enable the private companies to function are of the order of £2 billion. That is taxpayers' money. Perhaps in the due course of time we shall find that they were even more generous.
Then we have the sweeteners. Sweeteners which were devised to sell off public assets are a further massive charge which the taxpayers must pick up. They are excessive by any standards. Railtrack is being flogged off for £1.5 billion when experts calculate that its true value is far in excess of that. Private investors are to receive a 25 per cent. return on their shares in the first year. No wonder they may be interested! The calculations deployed by the Government and their allies are clearly faulty. But never mind, the taxpayers are there to be milked.
Then the Government are prepared to write off £1.46 billion of debt, adding to the £22.55 billion which has been written off for privatisation during the years. We never hear from the Government Front Bench about those write-offs. We never hear about those charges to the taxpayers. Incidentally, those write-offs vastly exceed the amounts which have been injected into the industries which have been privatised by the privatised companies. Again, that has been done at the taxpayers' expense.
I point out that £69 million-worth of profits were earned while Railtrack was in public ownership. Those sums are now to be transferred to the shareholders. Where did they come from? They come from the maintenance programme.
Then we have the substantial bonuses to which I have referred already. They are to be paid to the leading executives. On what basis? It is on the basis that they maximise short-term profits at a time when the railways need not the maximisation of short-term profits but long-term investment.
There is then the question of track access charges. In order to achieve that short-term goal, they are clearly set far too high. As my honourable friend, Clare Short, said when she led the debate on this matter in another place, it costs £175,000 in track access charges simply to put one passenger coach on the railways. She compared that with the £300 to £450 in vehicle excise duty for a coach to be put on the roads at a time when, for environmental and economic reasons, it is vitally important to transfer more freight and more passengers to the railways.
What of the prospectus? There is the extraordinary letter written by Mr. John Welsby, the Chairman of British Rail, on 2nd April to the Department of Transport. He said that the draft prospectus did not give a:
Railtrack must pay penalties if it breaks its agreement deliberately or otherwise with the railway operators. There are some matters within its control and other matters outside its control; for example, the weather and perhaps even industrial action. A sum of £75 million per year is provided over and above the usual access charges to cover such contingencies. But any performance improvements on the part of Railtrack will not match the amount paid for in penalty payments. Indeed, in 1995--and this is an extraordinary fact--Railtrack paid £80 million in penalty payments, which is £5 million more than the amount allowed for in the prospectus in relation to penalty payments. That appears on page 66 of the prospectus. Those are a few of a number of serious issues which can be raised with regard to the prospectus.
What other revelations are there in that remarkable document? It says that Railtrack's passenger access is unlikely to benefit materially from any increase in passenger use. That is not misleading but it is an extraordinary assertion. Therefore, what incentive is there for Railtrack to assist in that vital element of privatisation and the running of our railways? It goes on to say that the opportunities for expanding rail freight operations are limited. How is privatisation designed to stimulate passenger and freight use of the railways?
I shall not say too much about safety, but a deteriorating infrastructure does not enhance safety. Today, 50 sections of track on the West Coast mainline are subject to speed restrictions which did not apply under British Rail when it was handed over to Railtrack. Railtrack has been issued with two improvement notices by the Health and Safety Executive which expresses serious reservations about some aspects of Railtrack's policies.
Finally, I turn to our alternative policies which are set out in detail as an annex to the prospectus and by the Shadow Secretary of State--she will be Secretary of State--in her speech of 29th March, which is also annexed to the prospectus at page 101. I have only time to paraphrase what she then outlined.
Labour will use the extensive powers which are contained in the Act in relation to the regulator; the £2 billion subsidy and the power to acquire ownership to reintegrate the railways under a renewed British Rail; and the public and private partnership scheme, of which I spoke quite extensively in yesterday's debate, to enhance investment in rail and to increase passenger and freight usage.
The rail regulator is the most potent of all the utility regulators. He has the power to effect changes in the current regime. He can change Railtrack's obligations and its priorities so that the interest of the public rather than the shareholders can be reflected.
Through legislation we propose to make the rail regulator answerable to the Secretary of State. Through those means, we shall be able to control Railtrack's economic behaviour in a number of important ways, including the way in which investment spending is undertaken. We shall establish a different regime for access charging. We shall limit the possible disposal of extremely valuable land assets and we shall give consideration if necessary to clawing back virtually all income derived from property disposal.
We shall make Railtrack answerable to the national interest. We shall not allow it simply to search for short-term profits. That will enhance realistically the prospect of greater investment in the rail infrastructure and develop greater use of rail, which is what the country requires. It would have been better not to have embarked on the ridiculous exercise of privatisation, but through the means that I have outlined briefly we shall seek to remedy the curse that the Government have bestowed upon the nation. My Lords, I beg to move for Papers.
Lord Astor of Hever: My Lords, I am delighted that the noble Lord, Lord Clinton-Davis, has given the House the opportunity to discuss this important subject. I feel that the noble Lord has scored something of an own goal as this is a privatisation of which we on these Benches can be proud. I believe that Railtrack's stock market debut on 20th May will usher in a new era.
Rail privatisation will bring entrepreneurial ideas, marketing flair, innovation in services and access to private capital which will improve quality and choice in the range of services available to customers. Most important, it will change fundamentally the culture of the railway industry.
The first batch of new-style train operating companies has been running for only a few weeks but already those companies are brimming with ideas of how to improve efficiency and service, free from the dead hand of "state-producer" culture and Treasury constraints. Privatisation has transformed large parts of our national life and has delivered dramatic improvements in a wide range of transport industries; for example, long distance coach and bus companies, road haulage companies, British Airways and the British Airports Authority.
Privatisation will improve the management and performance of British railways as it has done in those and so many other industries. In terms of the quality, quantity and variety of those services, firms perform far better in the private sector. In 1979 the nationalised industries were losing £50 million every week. Privatised companies now contribute £50 million to the exchequer every week and are able to compete abroad and generate overseas earnings for the United Kingdom economy.
Of course, the Labour Party has opposed every privatisation since 1979 and is trying to derail this privatisation. The honourable Member for Oldham West began by saying, in effect, that no sane investor would contemplate buying Railtrack. But when he was switched by the Leader of the Opposition from transport to employment his successor, the honourable Member for Birmingham Ladywood, insisted that Railtrack was, in fact, full of jewels and was being flogged off at a price that "ripped off" the taxpayer. It must have been demoralising for her when it emerged that two million retail investors had registered their interest in buying Railtrack shares, as the noble Lord, Lord Clinton-Davis, admitted.
It must also have been demoralising for the four shadow Cabinet members sponsored by the main rail union, the RMT. The leader of the RMT expects complete re-nationalisation from an incoming Labour government, in the unlikely event that this were to happen. The honourable Member for Birmingham Ladywood has promised all sorts of evil things should Labour gain power. In the absence of a policy, the Labour Party is reduced to making scaremongering threats. However, I wonder whether Railtrack will be a priority when it is seen that privatisation delivers a better service. British Rail has become weighed down by its own unionised culture and monolithic structure. As the Economist wrote last year,
I understand that the RailDirect facility will be upgraded to handle several million extra calls a year and that steps are being taken to establish a single, national telephone number for train inquiries to come on stream later in the year. If local lines are busy, callers will automatically be switched to a TEB elsewhere in the network.
I am looking forward to new private sector management skills being introduced which should transform the attitude of those working in the industry. We should see upgraded facilities for business class travellers, improved facilities at stations, with particular emphasis on passenger security measures, improved access for disabled passengers and passenger lounges. We should also see dedicated bus links to selected stations, improved customer information and lighting on stations, refurbished rolling stock, faster services and extra ones on Sunday. I was delighted to see that the National Express Group plc aims to introduce on-board check-in facilities on the Gatwick Express for airline passengers in Club Class.
Rail's share of the freight market has been in decline since the 1920s. I believe that that decline can be checked and reversed through privatisation and liberalisation of rail freight services. In a few years, customers will be enormously grateful for this privatisation. It will focus operators' minds on the need to treat consumers as customers rather than their being made to feel as though they are an encumbrance to the running of the railway, instead of the reason for it.
Therefore, I feel that privatisation will have very positive effects on the interests of passengers and the carriage of freight by rail. I congratulate Her Majesty's Government and look forward to a railway system that provides an improved service at lower prices.
Lord Methuen: My Lords, I am pleased to be able to support the noble Lord, Lord Clinton-Davis, in today's debate and I thank him for his introduction to it. I come to the debate with a strong feeling of scepticism at the Government's attitude to rail privatisation. However, listening to the previous debate, I was struck by how much of what was said is applicable to this debate and the subject of competition.
A recent television programme suggested that Railtrack's investment in infrastructure is vastly underestimated at £1.4 billion per annum. The York Report suggests that a figure of some eight times that amount--that is, £10 billion a year--would be nearer what is actually required. It has been suggested by the consultants, W.S. Atkins, that a significantly higher figure would actually be relevant. The lack of investment in maintenance may well result in an insuperable maintenance backlog, speed restrictions and line closures. Indeed, those have already been mentioned as being applicable to the West Coast main line. The speed restrictions themselves are likely to make lines less economic and hence drive away would-be passengers.
The railways used to pride themselves on their safety record. Now we have Euston Station (the hub of the West Coast main line) closed by the railway inspectorate for emergency maintenance as the track is too dangerous to use. Then we come to track renewals. A figure of less than 1 per cent. per year has been suggested, resulting in perhaps 125-year life. British Steel and long-welded rails may have improved track life but that should be compared with the 30 to 40 year life expectancy on the Continent.
Perhaps I may now turn to the rail operating companies. It is good to hear the old names--for example, the Great Eastern, the Great Northern and the Great Western--coming into use again. I hope that they will succeed in living up to the traditions of their forebears, though I hope that the suggestion of a Member in the other place of reverting to Brunel's seven-foot gauge is not taken up! It is also suggested that local communities might take over the running of certain marginal branch lines. That harks back to the inter-war years when an enterprising railway engineer, Colonel Stevens, ran a series of rundown country railways using dilapidated, second-hand equipment, all of which I believe has now disappeared. I hope that that is not what our customers will get in such an instance.
We need a proper integrated and co-ordinated railway system, with guaranteed connections and consistent timetabling. Recently Midland main line suffered a major disruption to service, leaving its timetable in chaos. That did not prevent Regional Railways dispatching my local service five minutes before the train from St. Pancras arrived. The regulators in large power-operated signal boxes, such as Derby, have visibility of operations over a wide area, but Regional Railways do not connect with Midland main line. That is the sort of frustration which privatisation is bringing and which a recent European Union Green Paper on transport attempts to forestall by the linking of long-distance and local services. It is the sort of thing which really drives people back into their motor cars.
I have said nothing so far about freight traffic. In general we suffer in this country from having too short freight hauls to make railway freight economic at distances of less than about 200 kilometres, although there are obviously exceptions for certain train load
I wish to make two further points. First, I refer to the almost total destruction of the British railway rolling stock industry due to the lack of orders for new stock, caused by the hiatus of privatisation. Not even the antiquated "slam door" stock in the south east has been replaced. Does this mean that we have lost yet another industry in which we were supreme to Europe and to the Far East? Secondly, can the regulator do something about the ludicrous situation of rail vehicles being carried by road to maintenance depots due to the excessive charges levied by Railtrack? It must be obvious to everyone that there is something seriously wrong with our transport system when something like that occurs. What the railways need is long-term investment in infrastructure and rolling stock. I hope that privatisation will bring that about. We shall see.
Baroness Castle of Blackburn: I wish to congratulate the Government on having at last, after 17 years, produced a consultative document, Transport--The Way Forward. It is very green. The delicate green of the print is so faint that one can hardly read it. Of course it does not commit itself to anything. Oh no, after all there will be an election within a maximum of 12 months and that would be rash for this Government.
It is admitted that a year ago, after 16 years of Conservative Government, the present Minister of transport's predecessor, Brian Mawhinney, said there must be a national debate on transport. Therefore they went out to other bodies and there were consultations and the rest of it. We are told that this marvellous document highlights the areas of greatest concern. Some of us could have done that when the Government first came into office, and indeed we were doing so. Those areas of great concern have hardly been shy violets. The public have been screaming aloud about the growing congestion on our roads, the deliberate running down of our railways by this Government, and the growing menace of pollution, and absolutely nothing has been done.
I think the House will agree that I am about the most modest Member of it, but I cannot help contrasting the concern of this Government for transport problems--which we all admit are haunting us--with my own. Transport Policy is admittedly a much smaller document. I produced it after seven months, not 17 years and it is a White Paper. There is not a bit of green on it anywhere, because we were laying down policy in it; we had given thought to it before we entered Office. We discussed the matter and we produced documents. Any intelligent politician will have consulted on, argued and thought about transport problems in this congested little island ever since he or she entered politics. Therefore we were ready with our own approach. To cap it, the
Our approach was to say that because we are all living on top of each other and because the precious green areas of our country are shrinking all the time, we must have an integrated transport policy. We must cast aside the follies of the Tory Act of 1962 which stated that road and rail must be in competition to see which survives. We are still dealing with the result of that approach. I could not help but contrast not only the sluggishness of this Government in facing up to these problems but also the whole philosophy with which they have approached them. The Government are utterly confused about transport policy. Of course you cannot have such a thing as an integrated transport policy, which is only really possible if the major units are under public ownership! No, that will not do, they must have competition and so they must fragment the system.
I also cannot help contrasting the speed with which they are now pressing ahead with rail privatisation policy with the slowness with which they failed to produce a comprehensive transport document. Does not the motivation stand out a mile? The Government beg us in this transport policy "greenery" to have a consensus. We must think about it; we must not rush it; certainly we must not decide anything this side of the general election in case anything we decide is a bit unpopular with someone. Heaven knows the Government are desperately in need of any votes they can scavenge from anywhere! I sympathise with their mood but would you not have thought that common decency would have made them say, "OK, we cannot go ahead with unpopular decisions that might be involved in an integrated transport policy, so we shall hold up rail privatisation as well, instead of indecently pushing it ahead as quickly as possible." They are fragmenting, not integrating. They are chopping up the rail network into little bits and selling them off to the highest bidder and then dare to talk of a comprehensive transport policy. Why have they done it? They have done it, of course, to ditch the "reds". It is a combination of dogma and spite. The only motivation behind the present haste in selling off our rail network bit by bit is to present the next Labour government--which they know is inevitable--with a problem. It is a case of, if we cannot save ourselves let us at least make sure we do them mortal damage.
The Government may ask what our policy is. Of course we would not have sold it in the first place. It is true--and the Government know it--that they are planning in the coming general election the most savage and the most ruthless propaganda campaign against the Labour Opposition. If we say we shall buy back anything, they can then retort that people's tax will go up by sixpence in the pound, or any other figure they care to conjure up in their fevered imaginations. That is the tactic they will use to put us on the spot, and never mind whether they put the country on the spot too.
The Government know that there is no majority among the people of this country for this rail privatisation. That is why they want to get it through before they lose power. I shall tell you why there is no support. The public are not fools. They know that the Government's sums over this whole unhappy business do not add up. Every time we make a caveat, or enter a little warning to the Government or to the people at large that prices, charges, fares will go up, the reply is, "Oh no, that will all be regulated. We shall strictly control them". We then say, "You'll be cutting rail services," and the reply is, "No, every franchise will contain a commitment to maintain services". So where will the profit come from; or is it being done out of love for their fellowmen?
It is true that shedding labour is already going ahead--that one great panacea for everything in this Government's philosophy. I point out to those who ask, "What about taxation?" that the whole aim of privatisation is to make a profit for the shareholder out of the sacking of thousands. And who has to pick up that bill? It is the taxpayer. That is why public expenditure today as a percentage of gross domestic product is just a little higher than it was in 1979 when we left office. It is higher, despite all the cuts.
As one speaker has already pointed out, the Government are concentrating on short-term profit; and as long as they gain that, it is all right if a chief executive or two fails. He can always retire gracefully with a £1 million pension a year. The Government cannot lose. But the ordinary man and woman in the street can. Public sense is the answer to this mysterious arithmetic which does not add up.
I strongly support the powerful speech made by the noble Lord, Lord Clinton-Davis, in opening the debate. It is unanswerable. I do not have his mastery of all the figures and details, but I have a knowledge, and so have the public, of what this lot are up to, and the aim of the Government's privatisation stampede. We can see it happening. When the Government have broken the system up in the name of competition, they allow private firms to stick it together again until a public monopoly
I asked a Question in this House not many weeks ago. I asked why the Government, who had broken up British Rail Freight into three companies, were selling them all to the same bidder in the same deal. The answer I received--
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