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Volume 621: debated on Wednesday 31 January 2001

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Whether they propose to accede to the request from Railtrack plc for an early payment of a £1 billion subsidy.

The Minister of State, Department of the Environment, Transport and the Regions
(Lord Macdonald of Tradeston)

My Lords, the Government and the Strategic Rail Authority have begun discussions with Railtrack on the timing of certain payments due to it under the rail regulator's periodic review which was concluded recently. I cannot anticipate the outcome of those discussions.

My Lords, I am not sure whether I am pleased or displeased by my noble friend's Answer. Can the Minister confirm or deny my understanding of what he said in a television interview on Sunday? My noble friend was asked about the shambles that had been created in recent months. He appeared to respond that the present board which had created the shambles, and demonstrated that it probably could not run a toffee shop, would be left in final control. Is that the final answer, or is it possible for my noble friend, or somebody else, to dispose of the board if it does not do the job?

My Lords, the point I made was that the problems of the railways appeared to the Government to be more a matter of management than ownership. If Railtrack does not do its job the people who will dispose of the board will be the shareholders. In acting to safeguard their £5 billion investment in the company, the shareholders should ensure that the board is up to scratch. In turn, it is the job of the board to ensure that the management is up to scratch.

My Lords, does my noble friend agree that as 75 per cent of Railtrack's revenue comes from the public sector it is logical that the taxpayer should get something back from their investment in terms of the assets? I declare an interest as chairman of the Rail Freight group. I hear today that Railtrack's debts will increase to £8 billion in two years' time. It seems to be a funny way to run a railway.

My Lords, we intend to ensure that Railtrack, together with government and other parties, invests to improve the railways. I am pleased to note that in the past year its investment in the railways has been double the average figure pre-privatisation. I also note that because of the problems at Hatfield its shareholders are likely to suffer a Loss of £600 million. The impact of that loss should bring to bear the rigours of good corporate governance to ensure that the public get value for the money that they put it, just as the shareholders wish to protect their interests.

My Lords, does the Minister agree that people regard it as extraordinary that the more incompetent the company appears to be the more willing are the Government to hand it money? Will the £1 billion, or any other amount of money, to be provided to Railtrack in the short term come out of the amounts allocated to railway investment in the 10-year Transport Plan? Will the money to be spent on keeping the company afloat and fettling the tracks that it has allowed to get into such a bad condition be deducted from the long-term investment which was otherwise promised; and, if so, which schemes will be prejudiced?

My Lords, we do not anticipate that the £1 billion will come from other areas of our budgets in the Transport Plan. That investment has been allowed for by the regulator, and Railtrack simply seeks a re-phasing of the money. The Government's priority is to work in close co-operation with Railtrack and other elements of the railway industry—passengers, the Health and Safety Executive, the Strategic Rail Authority and, above all, the train operating companies—to try to put in place the confidence which, for understandable reasons, has been lacking in recent times.

My Lords, I declare an interest as a frequent railway user. Many passengers have been put off by what happened at Hatfield and the revelations since. Can my noble friend tell the House what has happened to passenger numbers since then?

My Lords, there was a sharp drop in passenger numbers following the disaster at Hatfield. That is why Railtrack's shareholders will suffer losses of £600 million: £400 million in compensation to the train operating companies and some £200 million for the rapid improvement of the track. The latest figures indicate that the number of passengers who travel by rail is the same as this time last year despite all the problems. On the London commuting lines passenger numbers are up 4 per cent on the same period last year. The problem persists on the Intercity lines. However, those figures appear to challenge the view that it will take many years before people return to the railways.

My Lords, can the Minister assure the House that none of the additional money is required to pay the penalties that the regulator will be obliged to impose on Railtrack as a result of its failure to keep train services running properly?

My Lords, the penalties exacted by the rail regulator on Railtrack, and any other penalties that it might incur, go to the Strategic Rail Authority. Therefore, that money is recycled in the industry through the Strategic Rail Authority, whose new status formally begins tomorrow and to which we look for leadership and vision in the years ahead.

My Lords, will the noble Lord and his colleagues undertake to look again at the absolutely insane structure created by the privatisation of 25 separate train operating companies?

My Lords, the structures which we inherited were overly fragmented. We have put in place a re-franchising process to be run by the Strategic Rail Authority which may reduce the number of franchises. I believe that the movement in the market will ensure that those franchises are concentrated in fewer hands in terms of ownership. However, I should like the House to recognise the real efforts that are being made by all parties in the industry, particularly through the Rail Recovery Action Group, to get the trains running again. I am delighted that they have been able to achieve slightly above the 85 per cent return to normality which was promised this week. The latest figures suggest that about 89 per cent of the 18,500 trains operated each day are currently running.

My Lords, I find it all rather confusing. Following all the questions which have been put, can my noble friend at least tell the House who is ultimately responsible for seeing that these massive subsidies to a private enterprise are used in the public interest? Who is the responsible person or body?

My Lords, the responsible body is the rail regulator. That office has been set up to oversee the activities of Railtrack, which is not a normal company in the sense that it is the custodian of an important national asset and the recipient of considerable public subsidies. I believe noble Lords will see that we have considerably increased the rigour of the regulatory regime.