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Baroness Carnegy of Lour: Putting the matter another way, is the Minister convinced that he will be able to continue to certify that these clauses are compatible with the European Convention on Human Rights, when the so far unknown code is in existence? He has certified that these two clauses satisfy the convention. That is surprising, and depends on good legal advice. The code will presumably affect the way in which the clause operates. How will he be sure that he can certify the Bill once the code appears?

Lord Warner: We can do so because on good legal advice the Government have certified that the Bill as presently drafted conforms with the Human Rights Act. The code of practice that we are discussing will be, so to speak, belt and braces. We will go further than the legislation as presently drafted. That will certainly make the situation better. We believe that there are sufficient safeguards in the Bill, but we are also saying that we understand peoples' concerns and nervousness, and we are pleased that CHAI and the GMC are working on the code of practice. We are confident that the code will produce further safeguards to reassure people in this House.

Baroness Cumberlege: How are we going to see the code?

Lord Warner: We have had many discussions about heavy-handed government interference with independent inspectors. Under the current process, the General Medical Council, which is the self-regulation body for the medical profession, is discussing with the chairman and staff of the new body the arrangements for a code of practice. We need to let that process take place in a sensible manner without interference from government. That is not the objective that noble Lords have been saying that they want to happen in relation to CHAI. I promise to write to noble Lords about the time scale involved. I shall do that as quickly as I can—but we do need to let that process take place.

Earl Howe: I felt that the Minister's opening remarks did justice to the gravity of the issue. I was less happy with the way that he carried on in his reply. I

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thank my noble friend Lady Cumberlege for the robust stance that she has taken, with which I completely identify. I am also grateful to the noble Lord, Lord Clement-Jones, because we do not always see eye to eye on these issues. He made some extremely helpful proposals. He is right. There are conflicting principles at work and there is a balance to be struck. But it must be a balance that is protected by a robust framework of safeguards.

Of course I was aware that the chairman of the two titans have been engaged in discussions in recent days. That is a welcome development. However, we need to see the fruits of those discussions. It is easy for the Minister to say that we are urging the Government to give CHAI the maximum independence, and suddenly we are asking to second-guess CHAI. We are dealing with an issue that is of a completely different order. It is indeed an issue of national importance and Parliament does have a legitimate role in the matter.

My noble friend Lady Cumberlege was right—there is in a doctor and patient relationship an inherent degree of the utmost trust. It is not reasonable that a patient should not know that his or her personal records are being disclosed or used for a CHAI investigation, other than in the most exceptional circumstances. It is also not fair on staff to ask them to breach the principles enshrined in the Data Protection Act without providing them with legal and ethical cover. Doctors and nurses are in a very privileged position.

I note the Minister's comments about it being a relatively rare occurrence for CSCI to want to gain access to personal data. In that event asking for consent to gain access should not be a problem. If such consent causes delay, we should say that that is just tough. The delay need not be more than an hour or two in most circumstances if the situation is urgent. I do not buy the argument that the Minister put forward in that context. Again I am grateful to my noble friend Lady Cumberlege for her comments on the matter.

The Minister seemed rather too ready—I do not wish to underline this too many times—to allow this type of information to be sprayed around on too liberal a basis. We have to resist that. If a protocol emerges from this process of discussion between the two chairmen, at the very least that there should be a role for independent persons, apart from CHAI, to adjudicate on the matter. It is not enough for the decision to be taken in-house. I believe that the matter is under discussion.

Lord Warner: I wonder if it would help the noble Earl and others here to say that, given the strength of feeling on this issue across all sides of the House, I undertake to consider it further. I would like to do that in consultation with the chairmen of CHAI and the GMC. I take the noble Earl's point, as will they, about having an independent review. I will look at the wording of the Bill and after those discussions I will continue to give noble Lords an update on the time-scales that are involved over the code of practice. I shall return on Report with further thoughts, if we have them, on how to take the matter forward in a way

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that will be satisfactory to opinion across all sides of the House. I emphasise that I do not underestimate the strength of feeling on this issue, and it is a matter of important public policy that we have to get right.

Earl Howe: I greatly welcome the Minister's offer and his willingness to take away the concerns that have been aired today. I am grateful to him for responding so positively. There is little more we can do now to enlarge on these important issues. Clearly, we will need to return to them at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 324 not moved.]

Baroness Andrews: I beg to move that the House be now resumed. In moving the Motion, I suggest that the Committee stage should begin again not before 8.30 p.m.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.


7.30 p.m.

Lord Berkeley rose to ask Her Majesty's Government whether the quality and effectiveness of the United Kingdom's railways are satisfactory.

The noble Lord said: My Lords, I am grateful for the opportunity to discuss today the quality and effectiveness of our railways. First, I declare an interest as chairman of the Rail Freight Group.

It is an opportune moment to talk about railways: the Government are in the middle of reviewing their 10-year plan for transport; the Comprehensive Spending Review is coming up next year; and last Friday the Rail Regulator made a significant statement about his interim review of Network Rail's track access charges. Perhaps now is an opportune moment to ask what the railways are for and what will be their role in the future; say, in 50 years' time. We are in good company, as the transport committee in another place is also considering the subject.

Will there be a role for railways in 50 years' time? It is reasonable to assume that our quality of life will continue to improve together with our desire for mobility, our acceptance of the need for respect for the environment, and the continuing decline in our manufacturing industries. That means that we will be importing more. Lloyd's List for 16th October showed that container demand has doubled in just eight years. Furthermore, the major shipping line, Maersk, expects imports by container at least to treble in the next 20 years. Will that trend continue and, if not, why not?

We expect mobility, but while wishing to have the benefits of it more and more, we prefer roads, airports and new railway lines to be located in somebody else's

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back yard. So now is the time for choice. Do we stick with the railways or do we change direction and base our future on roads and air, for example?

I believe that we should consider the following issues. All freight could go by road. In particular, will we be able to move all the goods from our ports by road when there is already severe land-side congestion? I believe that at Southampton there is a six-hour delay, with lorries queuing to get in and out of the port. Is it conceivable that no one will commute by train? What if all business and leisure travel was by air or car? How many more runways would we need and at what cost of air and noise pollution? What will the effect of road-user charging be on rail?

Apart from rail being safer than road, rail traffic can be controlled to give priority to those who need it most—for example, freight and public transport—unlike road, where whatever new roads are built, lorries often get little benefit as the roads fill up with cars. So I believe that the railways are here to stay, to grow in usefulness and efficiency. Closing parts of the network cannot be an option for any government looking long-term at the country's transport needs.

The key is to provide both the economic as well as the political environment for them to grow and prosper, as was originally set out in the 10-year plan. This is something that the industry and government must do urgently and continuously over a long period.

The rail industry must get its costs down. Thanks to the privatisation structure and the get-rich-quick attitude of Railtrack, the railways are now bogged down in bureaucracy; trains go slower with more delay; and, surprisingly to some, Railtrack spends even less on maintaining the network than BR did. Management of the industry has left much to be desired. How can we be in a situation of having hundreds of new trains sitting in the sidings south of the Thames to replace the Mark I rolling stock because no one realised that new trains needed more current? That is now being put right at a cost of 1 billion while the trains sit in the sidings and we clatter around on the old Mark Is. They are very nice but it is an incredible waste of money.

But with Network Rail, with the Railway Standards and Safety Board and the Railway Accident Investigation Branch, and with some hefty pressure from the Rail Regulator, there is evidence that things are beginning to improve. Network Rail is taking maintenance back in-house in many areas. That is indicative that not only will the costs fall but that it will take full responsibility for what happens. After recent events on the London Underground, I am sure that that is a good idea.

Moreover, two or three years ago, the cost estimate for increasing the gauge between Southampton and the West Midlands to take containers from a new port in Dibden Bay was 900 million. That has fallen to 40 million, which shows that realism is taking hold in the railways. There are ideas for micro-franchising in branch lines, with local companies maintaining the track at a fraction of the cost that Railtrack levied.

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However, government also have their part to pay. They must discourage the safety hysteria that has gripped the industry. It started with privatisation as a reaction to private profit creating what was perceived to be a less-safe railway. Things have moved on since then, but most of the railways accept that freight is now under government control and finance. The idea still remains that the hysteria must somehow carry on.

If Ministers never want to see another railway accident, they had better put a man with a red flag in front of every train, close the system down or provide money for gold-plating—and even then there will be an accident, the same as there is on any transport system. Alternatively, they can become more realistic—as I hope they will. The Minister of Transport, Dr Kim Howells, did a great service to the cause of common sense when in August he said that accidents will happen on any transport system, while noting that an average of 10 people are killed on the roads every day. I urge the Minister to carry on with such comments and actively pursue policies of treating rail and road in the same manner. This includes the role of the Health and Safety Executive.

Rail accidents have rightly or wrongly attracted criminal proceedings. A piece in today's Financial Times states:

    "Law still weak on companies that kill people".

There is a half-page spread, explaining how 10, 20 or 30 high-powered lawyers sit in a court room in Luton. Noble Lords can read it in the Library, if they want to. However, there no one is asking about the county council which removed a bridge over a railway line in Huntingdon 25 years ago without putting up a sign until a driver went over it one foggy night and was killed because a train ran into his car. Are they not just as culpable as companies? There must be one law for everyone.

I turn to the present. The Rail Regulator has published his draft final conclusions, which confirm that Network Rail must keep the network open and maintained to the current standards. That could save a great deal of money in certain areas, both in the management of contracts, undertaking work more efficiently and not undertaking work that is not necessary. It is clear that money must be saved by maintaining the mainlines more effectively, as the Rail Regulator has demonstrated, because closing secondary lines will have minimal effect on the finances as they receive little maintenance in any event, and it will have a major effect on the future network.

More money from the SRA and the Government will be needed than they appear to think necessary, but I urge them to be reasonable and to give Network Rail time. Let us recall that it has been in existence for only one year. I know from talking to many of the senior people that they did not have access to any of the information that Railtrack had about the quality of their network. If one looks at what they have done in a year, one can see how much change is likely to come in the next year or two.

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I recently had the privilege of going on Network Rail's measurement train and I am hoping to arrange a visit for the All Party Group. It indicates which bit of the track needs maintenance and when. That saves an enormous amount of money.

Therefore, the key is for the regulator to keep up the pressure on Network Rail to deliver and reduce costs. But if the work is not done when it is required, there is a serious risk that the network will degrade and that structural failures will occur, leading to prolonged or permanent closures, as well as, obviously, a worse service.

In conclusion, I plead for time for the railways. I also plead for the Government to continue to reinforce their message of getting rid of red tape and unnecessary rules and threats and of treating road and rail as complementary transport systems with similar safety, regulatory and financial needs. Then they should certainly put pressure on the rail industry to deliver. At that point, I believe that industry can start to create a rail network of which our successors can be proud in 50 years' time.

7.40 p.m.

Lord Bradshaw: My Lords, first, I congratulate the noble Lord, Lord Berkeley, on obtaining this debate. I say to the Minister that Labour has now been in office for six years. While it cannot be blamed for privatisation, it can certainly be blamed for the huge and ineffectual growth in bureaucracy.

We are in danger of making some of the mistakes that Dr Beeching made. He believed that sufficient costs could be saved by cutting the secondary railway—when it was near to the centre that large sums were to be had. We are again in danger of subventing hugely expensive organisations, such as the Strategic Rail Authority, the rail regulator, the Health and Safety Executive, which, incidentally, I believe wants more money, and all their acolyte consultants, advisers and contractors, while the secondary railway is threatened. I suggest that each line of the secondary railway could be saved for the cost of a few weeks' consultancy.

We must also avoid using the old canard about decades of under-investment. The railway prior to privatisation was serviceable and the West Coast Main Line had no speed restrictions.

I want to ask the Minister what the Government are doing to take the axe to the leeches on the railway. For example, do we need an expanded railways directorate in the Department of Transport, as well as an ever-expanding Strategic Rail Authority? What would we suggest? We suggest a few long franchises, which would include track, signals and timetables. They would last for 20 years and depend only on improved performance. That would give scope for planning and investment. I venture to suggest that two-year extensions and five-year franchises do not do so. The time the Strategic Rail Authority takes to let a franchise is far too long and the costs to both the Strategic Rail Authority and the bidders are far too high, with most of the money going to our legal

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friends. We would abolish the regulator, and open access for passenger operators would be done away with. But we would have—I hope that the noble Lord, Lord Berkeley, is pleased about this—a single-point adjudicator to protect freight interests.

We need an efficient railway, such as the Swiss have—particularly as, inevitably, road congestion will get worse. At present, we are getting more bureaucrats, more advisers, more consultants, more contractors and more sub-contractors, and, I venture to suggest, a very ailing railway.

7.44 p.m.

Lord Faulkner of Worcester: My Lords, I, too, congratulate my noble friend Lord Berkeley on securing this debate. I say to the usual channels that I wish we had more time to debate the railways properly. Perhaps that can be considered for the new Session.

The question that I want to address in the few minutes available is whether the railway is moving in the right direction. I believe that it is because the leaders of the industry—the SRA, Network Rail, the regulator, the TOCs and the freight companies—are now broadly pulling in the same direction.

Despite the huge problems created by a decade of under-investment and the catastrophic response of Railtrack to the Hatfield accident, so vividly described again by Tom Winsor last week, the railway is in far better shape than the media portray it to be.

The Times reminded us last month that:

    "The total distance travelled by train rose by 2 per cent to the highest level since the Second World War. The number of train journeys reached 975 million last year, and is expected to exceed one billion this year".

The benefits of having a decent, popular and affordable railway go far beyond the people who use it. Because so many journeys and freight movements are in key corridors or are taken by people going to and from work or travelling from city to city, the absence of the railway would have a horrendous effect on road congestion and on the quality of life in our towns and cities.

I ask noble Lords to imagine what life would be like if 75 per cent of solid fuel were not carried on the rails, if the commuter railways in our big cities did not exist or even if 55 per cent of all journeys between Newcastle and Manchester were not made by train—an extraordinarily high statistic. To those who argue that we need a much smaller railway—a new Beeching to slash the size of the network—I say: look at the facts.

Despite the difficulties of recent years, rail passenger journeys are up by a third and rail freight by 50 per cent since 1995. How ironic it is that the route described by the Select Committee in another place as having the worst overcrowding turns out to be the North London Line—the entire closure of which was proposed by Beeching. The town of Mansfield lost its railway in the 1960s but is now on a 32-mile new route from Nottingham, on which demand is growing by 15 per cent a year. The Settle to Carlisle line, reprieved from closure by Michael Portillo, is now undergoing a 3.2

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million upgrade. Closures are not the answer. The solution to overcrowding is investment in new lines, new stations and new rolling stock.

As the demand for travel grows, only the railway can provide a socially and environmentally acceptable mode of transport. If we are serious about meeting our international commitments on greenhouse gas carbon dioxide emissions, road traffic growth and worsening congestion must be addressed. Therefore, I welcome reports that the Government are planning a switch to road-user charging. I hope we shall hear by the end of the year that they will adopt a demand-management approach to air travel, too, and resist the demands of the airline lobby on airport expansion.

At the same time, as my noble friend said, the railway deserves much greater credit for its safety record—certainly compared with the roads, on which a car driver is six times more likely to be killed on every passenger-kilometre travelled. More people are killed on the roads every day than on the railway in an average year. And the railway is becoming safer because, unlike in the case of road accidents, every time there is a serious incident on the railway, lessons are learnt and improvements made.

For the first time since privatisation, I believe that the railway is now in competent hands and deserves to be given the opportunity and the support to show what it can do.

7.48 p.m.

The Earl of Mar and Kellie: My Lords, I hope to raise some issues around franchising and the national railway in Scotland.

When thinking about railway franchises, at least three features are worth highlighting. At present, the fundamental point is that they are generally too short. That has a significant effect on training, on maintenance and development and on re-equipping. My presumption is that, to make the most of a franchise, a substantial period of time is required; otherwise, a short period will produce no more than another couple of years of the same. And why not, when railway equipment generally lasts for 40 years?

To support my argument, I believe that we should consider the ScotRail franchise process. Initially, with 20 years on offer, there was interest from United Kingdom companies, as well as rail operators from Denmark, France, Holland and Germany. Consequent to the reduction of the franchise length to less than 10 years, only the three UK operators are still interested—that is, National Express, which is the incumbent, Arriva and First Group.

On these Benches we believe in rolling franchises. The franchise continues, provided that standards and expectations are met. I believe that that would be good for staff training, good for development of an entrepreneurial nature and good for new equipment.

Turning to Scotland and its railway network, it must be viewed as a national railway and not as a regional network, especially as the latter tends to be shorthand for a peripheral and unimportant system. That is not just a political point to keep up with the SNP, which

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does not trouble the Government in this House, but it reflects the fact that the franchise process is devolved. Scotland can choose to have a distinct national passenger railway by determining the level of subsidy that is to be invested in the system. It is inevitable that subsidy is needed in Scotland and the Scottish Parliament must decide, as a quality issue, how much. I look forward to the conclusion of the franchise award.

Now I want to complain about Network Rail and the Strategic Rail Authority, which are not devolved, and in particular about the downgrading of all Scottish main lines to major secondary route status and the subsequent withdrawal of investment. The East and West Coast Main Lines have not been downgraded, but the Scottish sections will not be very exciting.

So the future in Scotland seems to go like this: the new Scottish franchisee can develop the passenger railway service in Scotland provided it does not need improved tracks, signalling and stations. Is that really the United Kingdom Government's intention?

7.51 p.m.

Lord Palmer: My Lords, I, too, thank the noble Lord, Lord Berkeley, for asking this most timely question and for his superb introduction. I am a frequent traveller on GNER, whose chief executive is a distant cousin of mine. Along with other noble Lords, I greatly welcome Jarvis's retirement, although I am amazed to see that the contract was worth only 180 million per annum.

When we last debated railways almost exactly two years ago, I started my speech by saying that the railway industry in this country was in a terrible muddle and mess, and it is sad to note that the situation has not greatly changed since then. Ask commuters what they think of our railways and the likelihood is they will say that if anything, matters have got worse. If we really want people off the roads (which I believe passionately that we do), we must have a reliable and safe railway network, and it is the Government's job to ensure that the industry is properly financed. I still believe that the industry is surrounded by far too much uncertainty; franchises ought to be renewed for a minimum of 10 years, particularly if one is to expect train operators to invest their money into the system. I believe that franchise re-bidding is extremely harmful to the industry, as it creates uncertainty for staff at all levels.

I cannot imagine that there are other European rail networks still running with 25 year old diesel locomotives, most of which under the present situation are expected to last another five years. On the GNER line, which has one of the better punctuality records of our railway operators, there is still a horrific backlog of maintenance required, particularly with the quality of the overhead wires. The slightest gust of wind seems often to bring the east coast line to a grinding halt, and I hope that there will be sufficient sums available to Network Rail to speed up the overhaul of the overhead wires.

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For some extraordinary reason, the passenger train companies have agreed that return tickets cannot be valid for more than a month and I do not understand the logic behind this. Prior to privatisation, tickets were valid for three months. Why cannot passenger train operating companies revert to that system?

Parking at some stations is a problem, particularly at Berwick-upon-Tweed. It has become impossible and only a month ago I got the last empty space. Had I not, I would have had to go further into the town, no doubt missed my train, and would have had to buy a brand new rail ticket. I believe that Her Majesty's Government must revisit station parking as a matter of urgency, as to get the infrastructure correct is a vital component to the success of our railway network.

And what is the lot of the hapless railway commuter? On a twice-daily basis they face appalling conditions: lack of cleanliness; chronic overcrowding; lack of any security and minimal staffing of stations. What a way to treat them! If such conditions were endured by livestock the country would be up in arms.

I believe that there is a great future for our railways. It needs the right level of commitment and a great deal of common sense from the Government. I urge them to take this chance to grasp the problems facing the industry. Being such a tiny country in geographic terms, we ought to be able to run the best railway system in the world, and I hope that the Government will give our railways their full backing.

7.55 p.m.

Lord Methuen: My Lords, I too am grateful to the noble Lord, Lord Berkeley, for asking this Question about the quality and effectiveness of our railways. There was a time when our railways were the envy of the world. Now we lag behind our European counterparts without any significant high speed railway lines, although we have the beginnings with the opening of the first phase of the Channel Tunnel rail link last month.

Investment is there. The noble Lord, Lord Berkeley, and myself visited the Virgin training centre in Crewe where we were allowed to play on their 2.5 million simulators. It was very stimulating to see the type of equipment and training that is now available to Virgin's drivers.

We have to understand what we want from our total transport system, let alone what we can afford. We have to take a broad view of both road and rail transport, comparing them on an equal basis for both passenger and freight movements. Even in the 1930s the railways were complaining about the unfair treatment vis-a-vis the road traffic industry. Our objective must surely be to provide a transport system that, where practical, gets people out of their cars and on to public transport. Congestion charging must play a part in that.

But we need railways that are affordable and adequately safe. The European train management system is the ultimate aim for the high speed and densely trafficked lines, but it is surely not cost effective even on the lesser branch lines. For those we

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need a lower cost but adequate standard of safety and local control and promulgation of their services, as mentioned by the noble Lord, Lord Berkeley. We are seeing signs of that happening in the North East where the North Yorkshire Moors railway might take over the maintenance of the Whitby to Middlesbrough railway.

However, our main problems lie in our conurbations and motorways. I quote from a yet to be published report which states that charging for using our roads in both those circumstances, although it may be unpopular, provides a very large new potential market for public transport users, which in turn may tip the investment balance substantially in favour of public transport of whatever type. In that scenario rail transport has to show that it offers value for money. I look forward to hearing the Minister's response.

7.58 p.m.

Lord Sawyer: My Lords, I thank the noble Lord, Lord Berkeley, for introducing the debate. In the short time available to me I want to say something about people. Since the industry was privatised—some 20 private companies now run the majority of the industry—too much time has been spent concentrating on profit and not enough time spent concentrating on people, although the industry employs 40,000 to 50,000 people.

Paradoxically, if the companies spent more time on people—employees and customers—profits might be easier to earn. I believe that the approach of the industry to people is basically—although not universally—a continuation of the old British Rail culture that employees are expendable and customers are captive and that therefore we do not need to do anything exceptional in this area to be successful and to make profits. I strongly believe that that is wrong and that in fact the opposite is the truth. In my opinion the sector will succeed only if it makes employee and customer satisfaction its absolute and overriding priority.

Customer satisfaction will come only through employee satisfaction. There is little public evidence that the majority of the rail companies have a highly trained, strongly motivated and highly valued workforce. I think that that is fairly obvious through one's own experience as a customer.

Employees focused on customer service, who themselves felt highly valued and motivated by the business leaders and managers, would provide a service to customers of a standard that most of us rarely witness or experience. I say "rarely", because I have experienced good service. It is wrong to say that it is universally poor, particularly, for example, on GNER as a first-class ticket holder. But that standard of customer service is rare. It should not be rare. It should be the baseline for all customers, including standard-class customers on all lines and not just on some lines and only for first-class customers.

The UK standard for achieving business success through people is the UK Investors in People award. The majority of rail companies are not Investors in

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People qualified. I find that remarkable and would suggest that Mr Richard Barker might consider that all companies that operate or seek to operate a franchise should be holders of the Investors in People standards. After all, that standard now covers more than 40 per cent of British industry. There are no people measures in Mr Barker's strategic plan. The championing of the Investors in People standard would go some way towards rectifying that. As a director of Investors in People, I hope to be able to discuss this matter with Mr Barker, and can assure him that, if he were to travel down that path, many people would be pleased to offer a great deal of assistance.

I also suggest that the SRA should require all companies to conduct an employee and customer satisfaction service on an ongoing six-monthly basis and that the information should be made available to employees and customers. The information would be equal to, if not more important than, the quality and reliability information and the other performance indicators that are already used in this industry. This new kind of information about people that I look for will tell us additional and important information about employees, about how they are managed, how they are valued and what they think about their management. This should also be extended to customers.

By measuring these things and working for improvements with people and customers we shall see a real change in culture and an improved travelling experience.

8.2 p.m.

Lord Lea of Crondall: My Lords, I am able to speak for four minutes because I had my name down, but I think it was omitted inadvertently from the list. The good news is that I think there is time in hand.

This debate is particularly well timed. The debate in the country on transport is now crystallising in a very exciting way. The key to this is the terms of competition for road/rail market share in the areas of maximum congestion; that is, the big conurbations and the intercity flows.

It is hard to remember a time, however, when such totally contradictory conclusions can be adduced from the same information. It is true that the input/output of railway performance has deteriorated for a host of reasons, some of them regulatory, some engineering in a broad sense and some management. Nothing I say is meant to detract from the performance to cost agenda facing the industry.

Given all that, we can now see a strategy for a new political economy of transport which starts with the fact that, in a nutshell, we cannot choke off both rail and road at the same time. If choking off some road growth is inescapable—which it is—we cannot also choke off rail growth. That would be stupid. We have to provide for rail growth in the key conurbations and medium distance; that is, leaving out of the equation, just for the moment, the distances where the airlines are part of the equation.

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So the picture presented is one of an urgent need to use market principles of marginal costs—I emphasis "marginal costs". Marginal costs determine behaviour. The marginal cost of road transport in congested areas must go up; the marginal cost of rail transport must go down, or at least not go up. Otherwise, there would be a contradiction. We must be logical about the matter.

Rail capacity must be there or choking off road would lead to an impossible political economy equation. One reason why the political economy of transport has not been working is that we have the obvious paradox that the majority of investment for public transport—mainly railways—is now intended to be private finance, but the majority of the investment for private transport—mainly roads—is actually public finance. That is what gives a typical Treasury official a headache, if not a nervous breakdown. What he or she sees is a demand for more cash to go down a black hole, whereas in fact the Treasury revenue on the road side has yet to come in and transform the marginal cost of journeys, so that the externalities of congestion and environmental impact produce a new equation where there is growth of demand for rail transport. In my opinion, it does not matter whether it is hypothecated finance, but the political economy, as I say, is that the market would produce that switch.

We know of the extreme difficulty of the politics of this, but I give one figure. A charge which produced a 5 per cent reduction in road traffic could increase by 50 per cent the demand for public transport. So this turns on its head the usual objection that the increase of public transport will not take up more than one year's traffic growth on the roads. That spectacularly misses the point.

We have to look at the timescales of this because it is a very challenging task to get A done before B, unless someone is going to say you cannot do B because you have not yet done A. It is a question of the charge versus the creation of the capacity on the public rail transport. We need to roll forward the 10-year plan. The fact is that the framework has materially improved the quality of the analysis. I hope that my noble friend will take on board the fact that the all-party parliamentary group on railways will shortly publish some quite outstanding analysis on this whole question by Professor Phil Goodwin of University College London, and we shall be commending his report to everyone with an interest in these matters when it is published in a couple of weeks' time.

8.7 p.m.

Baroness Scott of Needham Market: My Lords, as ever it has been an interesting and constructive debate with contributions from noble Lords with some years of experience in transport. In summing up from these Benches, I thank the noble Lord, Lord Berkeley, for initiating the debate. Perhaps I may say at the outset how refreshing it was to hear someone speak of transport planning in a 50-year time-scale in an age in

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which we are lucky if we can get the delivery agencies to look five years ahead, and in which junior transport Ministers change annually.

As we have heard from various noble Lords, there are serious problems in the industry. My noble friend Lord Bradshaw and the noble Lord, Lord Berkeley, both referred to fragmentation of decision-making in the industry, to which I shall return. My noble friend Lord Mar and Kellie and the noble Lord, Lord Palmer, talked about the problems brought about by short-term franchises.

However, declaring an interest as chair of the LGA transport executive, I shall concentrate my closing remarks on the local and regional dimension to rail services. It is vital that we remember that a significant proportion of the 3 million passengers carried by rail every day travel on our regional network. The effect in certain areas is significant. In Strathclyde, for example, 25 per cent of all commuters enter by train. I am told that the Wharfdale Line carries an amazing three-quarters of those entering Leeds to work. Without the Trans-Pennine Express, the nearby motorway network would become impossibly congested. The noble Lord, Lord Faulkner of Worcester, gave other examples in which that is the case. It is certainly true that rail is playing an increasingly important role in access to airports; one has only to consider Manchester and Birmingham to understand how important it is and how good it can be when done properly.

The danger of an approach that considers rail purely from the point of view of input without considering wider outputs such as relief of congestion, economic regeneration and accessibility is that from that end of the telescope, local and regional services start to look unattractive. That means that they suffer from lack of investment, which further undermines the routes and sets in a general spiral of decline.

When decisions are being made far away from the places to which they relate, such issues receive far less attention than they merit. Rail links viewed centrally are a cost to be minimised; viewed regionally, they are a vital part of the economic and social life of an area.

I see no reason why rail should still be under centralised control. The UK is now the only country of any size in Europe that organises its rail services in that way. Most countries now have some sort of devolved funding mechanism that works across the whole country. As we have heard from my noble friend Lord Mar and Kellie, we have devolved spending, at least in Scotland. He made well the point that viewed from the SRA in London, Scotland is a regional network, but that viewed from the decision-makers in Edinburgh, it is a national one, which means that it receives the importance it deserves.

I was pleased to hear my noble friend Lord Methuen and the noble Lord, Lord Berkeley, talk about micro-franchising. There is no reason why we must have a "one size fits all" approach. We can innovate and experiment.

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The time for arguing about the merits of privatisation has long gone. As my noble friend Lord Bradshaw said, we are now beyond having to make the case for increased investment. As I am sure that the Minister will say in his reply, money is entering the system. The question is whether we have the structure in our railway to spend it effectively. We have a rail section within the Department of Transport and the SRA. Why do we need them both? A cynic could say that the SRA exists only to provide a safety cushion between Ministers and an angry public. Do we need the Strategic Rail Authority, Network Rail and a regulator?

Tens of thousands of people are making reliable and safe journeys every day on the railways and are served by dedicated staff. The problems are not with them, or even necessarily with the contractors; the problem is with the structure and the culture of blame, bureaucracy and buck-passing that has developed because of it. That is what we need urgently to address.

8.12 p.m.

Viscount Astor: My Lords, this debate is timely because it follows the House of Commons Transport Select Committee report on overcrowding and last week's announcement by Tom Winsor, the rail regulator.

The Government published a 10-year plan for transport. It is an odd plan. It is reviewed each year; targets are tinkered with and reduced or increased as the mood suits. It is not actually a 10-year plan at all; it is a work in progress—some might say a rough draft—because not a single major objective looks as though it will be met. Nor, indeed, are there any signs that any of the key indicators set out in the plan are moving in the right direction; most are moving in the wrong direction.

Privatisation of the railways was an improvement. I stand by that claim. British Rail had been underfunded by governments over many years. Consider the increase in passenger numbers; consider the huge investment made by the train operating companies in new rolling stock. Some train companies are now net contributors to the Treasury. None of that could have happened under the old British Rail. But let me say again, as I have said before: I accept that we did not get it all right. The interface between the train operating companies and Railtrack did not work well. Sadly, when that became apparent early in the Government's tenure, they chose to ignore the problem until it was too late.

We admit our mistakes, unlike this Government, which, rather than make improvements, chose to destroy and re-nationalise to suit their political motives. They did not heed the advice of the rail regulator. I quote Tom Winsor:

    "Stephen Byers made matters worse by putting Railtrack into administration. At that point cost control went out of the window . . . I think that Mr Byers should not have acted as he did".

He also said:

20 Oct 2003 : Column 1352

    "Network Rail lacks basic railway skills and is still guilty of excessive caution in its handling of track repairs".

So trains run even later and are even less reliable, and the Government are now cheating by allowing train operating companies to add 30 to 40 minutes to many timetables to make it seem that trains now run on time.

Is the Minister proud of that? Is it an honest or effective way to run a railway? I look forward to his explanation. No doubt that interesting sleight of hand on timetables will allow the Minister to claim a huge improvement. Try telling that to the poor, long-suffering passengers.

Will the Government fund the 22.7 billion that the rail regulator claims is required? If so, how?

As has been mentioned, the train operators suffer from one problem that could be easily rectified: increasing the length of the franchises. How can they plan for the future?

Furthermore, how can the train operating companies invest in new electric-operated trains when it is clear that, by going electric, with new faster trains, there will not be enough power—electricity—available to run all the trains? What will the Government do about that? Who is responsible?

Are the Government and Network Rail committed to upgrading the whole West Coast Main Line? If so, what will be the timetable? Network Rail refers in its 2002 annual report and accounts to the,

    "fundamental uncertainty of the West Coast Route".

The rail regulator's view is that, if Network Rail does not get its act together, he is willing to pull the plug on the project. But that is not the view of Richard Bowker, the Strategic Rail Authority chairman, who opposes any delay. What is the Government's view?

In the 2002 Department for Transport report the Government claimed that Network Rail would offer many advantages over Railtrack. Let me quote a few. On page 42 it refers to,

    "an alignment of the operations and incentives with the wider public interest".

Can the Minister give us an example? It also claims that there will be,

    ldquo;a reinvestment of surpluses earned on operations back into the rail industry".

When do they expect the first surplus to appear for reinvestment? Finally, it refers to,

    "more efficient financing through a strong capital structure offering a lower cost of capital".

How much has been saved?

The department's 2003 report failed to address any of those issues. So the Minister has an opportunity to set the record straight today.

Also, why do we need the three overlapping competing regulators—the Strategic Rail Authority, the Office of Rail Regulation and Network Rail? We would support the Government, if they come forward with a sensible plan to rationalise those bodies.

20 Oct 2003 : Column 1353

8.16 p.m.

Lord Davies of Oldham: My Lords, we have had a most interesting and constructive debate. It was ably introduced by my noble friend Lord Berkeley, whose great expertise in the field set the theme that infused all the contributions; namely, a commitment to the development of the rail service and to dealing with anxieties where it has failed to live up to expectations.

I note the noble Viscount's remarks at the end of his speech. For a party that continually tells us how much it will save on public expenditure, here is yet another plea for necessary expenditure. The party recognises that substantial sums are being mooted as essential for the development of the system and merely asks us how we intend to finance it. The noble Viscount will know that current demands possess an external quality. We will look at overall financing of the railways. But he will also recognise that the Government have already made a substantial commitment to railways investment.

I recognise that the noble Lord, Lord Methuen, the noble Earl, Lord Mar and Kellie, and my noble friend Lord Lea all advocated development of the railway. They expressed concern that it did not meet every expectation. All their contributions were positive. I recognise, in particular, the important points made by the noble Baroness, Lady Scott, and my noble friend Lord Lea that we must look at the externalities with regard to the cost of rail. We should recognise that transport must be looked at in terms of costs and investment.

We recognise, as does the country, that under-investment in railways will merely result in increased journeys on an already overloaded roads network. We need to get the balance right. But, in response to pleas to reduce bureaucracy, I make the obvious point that we are not about to shake up the structures concerned with investment and development, monitoring and guarantees for railways. We have far more urgent issues to deal with. There are far more crucial decisions to take than the question of the bureaucracy of railways administration.

The noble Viscount was honest enough to say that this Government inherited a botched privatisation. They inherited, not only botched privatisation, but a network that had been starved of long-term investment. This Government are committed to that investment. We do not have time to involve ourselves in fanciful concepts. I notice that the Liberal Democrats are once again engaging in their general theme of devolution of everything that can be devolved. There are many things that ought not to be devolved. However, we do not have time to look at how we may devolve greater structures with regard to rail. The noble Earl, Lord Mar and Kellie, already has devolution. The Minister in Scotland is responsible for rail investment. It is the Liberal Democrat Minister who is responsible for rail investment. Therefore, he should address his remarks about increasing investment to that source. We are concerned about getting the railway system right.

20 Oct 2003 : Column 1354

I accept the point that was made by several noble Lords that the existing structure of franchises seems to have rigidity, but there was an announcement today of a franchise for 15 years for Wales and the Borders. I take on board the point made by the noble Lord, Lord Palmer, that franchises could be longer, which would give greater flexibility. If we are to get investment it will be necessary in some areas to rethink the nature of franchises. However, that type of consideration can be taken only by a bureaucracy and structure that is secure about its objectives. That is why we will ignore remarks about another shake-up of the administration of the railway and concentrate on the realities of the system that we need to deliver.

One of those realities is safety, as my noble friend Lord Faulkner indicated. Who better than the President of the Royal Society for the Prevention of Accidents to remind us of those issues? I ask him to bear in mind the point made by my noble friend Lord Berkeley in introducing the debate. He pressed it a little more strongly than I would when he used the phrase "hysteria" about safety. Certainly, we need to strike a balance about safety. We all know how much safer rail transport is compared with road transport. However, it is essential post-Hatfield that we have safe and secure systems in place. That is why certain aspects of franchises have been drawn up very tightly indeed and why people have been held to account, for which I am sure the House is grateful.

We are aware that a balance has to be struck, as my noble friend Lord Berkeley indicated. We must guarantee to the public that the railway is safe. At the same time, we must ensure that the necessary investment goes into a safer railway but also an effective and efficient railway. The Government are providing the long overdue sustained investment that passengers want in the network, spending some 73 million a week to improve the railways so that, by 2005, the Government will be spending double what was spent in 2001. That commitment to sustained investment is already bringing benefits. I challenge the Official Opposition to say whether they back that type of investment and whether their public expenditure plans, which incorporate 20 per cent cuts across the board, includes or excludes the railway as it does so many other areas of policy when they are challenged.

As a result of the investment, the Secretary of State launched the South West Trains new rolling stock which will bring greater quality and comfort to passengers on some of our busiest commuter lines. It also means, and I will reply directly to the noble Viscount, that we are investing in the West Coast Main Line. We do intend to ensure that it is delivered. It will mean an 80 per cent increase in capacity on trains that run on the West Coast Main Line. We are meeting necessary obligations. Rail passenger numbers are higher than at any point in the past 50 years. Passenger kilometres are higher now than in any year since 1947. Overall passenger rail use is up by a fifth since 1997. Freight traffic—a cause that is very dear to my noble friend Lord Berkeley who introduced the debate—is up by 24 per cent since 1997. Some 40 per cent of all rolling stock will be replaced over five years.

20 Oct 2003 : Column 1355

The noble Viscount asked the Government perhaps to admit their mistakes. I will indicate on the margins that I am somewhat disturbed about the matter of rolling stock coming onstream without the power requirements for that rolling stock having been adequately and accurately foreseen. It is rapidly being put right, but I accept his challenge on that point. If we are producing new rolling stock that increases power demands, it is essential that those who propose to introduce it are very sure that there is access to power.

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