Mrs. Margaret Thatcher (Finchley)
We are debating the Bill under some difficulty because we are without the [column 1015]1973 report and accounts, although the 1972 report and accounts were laid over a year ago. We are, therefore, having to make our observations only on the 1972 report and on the known deficit then, which was £26.2 million after subsidy on the old basis. We have no idea what 1973 has produced, except perhaps for a report in The Times of Saturday—and I must point out that reports in The Times are not always true—to the effect that the deficit for last year might be £50 million and that there are in the pipeline substantial increases in salary bills.
We are also without a White Paper on future strategy, as was promised by my right hon. Friend the Member for Yeovil (Mr. Peyton) last November when he made his statement. He said at that time that he would embody his proposals in a Bill and that there would be a transport White Paper underlining the greater emphasis which the Government were giving to the railways and other forms of public transport. We expected that White Paper to accompany the Bill. We are today faced with bigger subsidies, bigger costs and bigger fares without having been given the proper information on which to base a judgment.
It appears that there is some urgency about the Bill, first, because even on the 1972 accounts British Railways were not far from the limit of their borrowing power and, secondly, because the system of special grants in operation from 27th July 1972 to cover financial deterioration amounting to £32 million that year, as F. Mulleythe Minister said, has not been put into legislation but it must have been the subject of a supplementary estimate at the time and could, therefore, have been raised and debated in the House in the usual way.
We could perhaps have dispensed with either the 1973 report or the White Paper had the history of dealing with the railways over the last 10 or 15 years been one of steady continuation along the same path, but it has not. The whole philosophy of the Transport Act 1968 is now reversed. That legislation was based on two propositions. The first was that the railways had no hope, from profits on their other passenger services and on freight work, of supporting the many non-paying passenger services which they were expected to retain. The services which [column 1016]required help were to be identified and separately costed so that a conscious decision could be made whether the maintenance of the service was justified in the light of its cost. This was done, and the list is given at the back of the annual report, with the cost against each. I suggest that that is a very valuable list indeed.
We understand that there has been some difficulty in accounting procedures, but at least there was some financial discipline. If the right hon. Gentleman and his staff found difficulty with those accounting procedures, they are certainly going to find difficulty in allocating overheads for signalling and track between passenger services and freight. All accounting problems are difficult and involve certain assumptions, but we should not fail to attempt them and then replace the whole thing by an open-ended subsidy.
The real trouble about the accounting procedures for individual grant-aided lines was not that they could not be worked out according to the Cooper Brothers formula but that in all public discussion about closure proposals the public were never prepared to accept the very large figures which were always involved.
I suppose the right hon. Gentleman has used that argument to go to a system of total deficit financing, and I would question the wisdom of that course. It appears that there is no financial incentive involved in the new system.
The second thing that came out of the 1968 legislation was that capital debt was to be written down to a level at which it was reasonable to expect that interest payments could be met out of revenue in the early 1970s. The debt, therefore, was written down from £1,562 million to £300 million. That was a very short time ago, but even that hope and expectation has gone. Within two years the strategy ran into difficulty, and has now been abandoned. That policy itself was wholly different from the one devised five years earlier under the Beeching plan. Within a decade there have been two policies and both have been abandoned. This is difficult enough for politicians, but it is even more difficult for those who run the railways. They must plan ahead if [column 1017]the service is to continue, and must have a clear basis and a financial programme on which to do it.
Looking at it from the consumer's viewpoint, we all know that yesterday there were fare and freight increases of 12½ per cent. and 15 per cent. respectively. The commuter well remembers the almost total dislocation of services last winter during the ASLEF work-to-rule when the passenger was expected to suffer, and did suffer, intolerable conditions. Yet he still has to put his hands in both pockets to pay—first for the season ticket, and then for the subsidy—and he was not getting anything that could remotely be called a service.
Before we give this Bill a Second Reading we shall want to be assured, on behalf of the travelling public, by F. Mulleythe Minister of Transport or Michael Footthe Secretary of State for Employment that there will be no repetition of those events. Against the unusual background of there having been two U-turns in strategy in 10 years in a nationalised industry which is supposed to be a panacea for everything, we are now trying to plan for the future.
The heart of the Bill is in Clause 3, which alters the basis of support from specific grants to general deficit financing. I should like to say a word or two about general deficit financing. First, I believe that it is bad for the morale of those who work on the railways. During the first two years after the Transport Act 1968, when the railways made a profit, I had the impression that this was very good indeed for the morale of all those who worked in the service. They could hold up their heads and say that they were part of a flourishing and profitable concern, and the whole spirit and atmosphere of the industry seemed to change. Then they got back into difficulties again. I am wondering whether it is now right to go to a wholly open-ended subsidy system.
Clause 3 also refers to two EEC regulations and somehow conveys the impression that the doctrine of support for the whole system rather than specific support for separate parts is inherent in the two regulations. That just is not so. I have been all the way through both regulations, and the language is just as consistent, if not more so, with separate subsidies for [column 1018]a part, as it is for subsidies for the whole passenger system. Indeed, the regulation commences by condemning that which it goes on to permit. It begins:
“Member States shall terminate all obligations inherent in the concept of a public service as defined in this Regulation imposed on transport by rail, road and inland water way. Nevertheless, such obligations may be maintained in so far as they are essential in order to ensure the provision of adequate transport services.” The whole philosophy appears to be that if one subsidises a part one must look at the effect on the whole. This is much more akin to the philosophy of the 1968 Transport Act than to a general subsidy.
I do not know where the right hon. Lady gets the idea that we have changed the situation because of the EEC regulations. That is not so. The change comes about because of the nature of the system. I was extremely moved, incidentally, to hear the right hon. Lady speak so movingly about the troubles of the railways and the travelling public. I was trying to search my mind as to who was responsible for the railways at that time when they turned from a small profit to a deficit. It was the then Government and their actions from which the travelling public suffered.
I know the right hon. Gentleman knows this Bill very well, but it appears he does not know quite as well the wording of the Explanatory and Financial Memorandum, which in relation to Clause 3 uses the curious language:
“Clause 3 repeals section 39 of the 1968 Transport Act under which the Secretary of State makes grants to the British Railways Board for individual unremunerative passenger services, and which has become otiose in view of the new methods of financial support for the whole rail passenger system established by the EEC transport regulations mentioned below.”
I think that conveys the impression which I indicated in my speech. I am trying to say that the EEC regulations are just as consistent with the 1968 system of support as they are with the one proposed in the Bill, and there should be no question of using the EEC regulations to justify the change of system. The choice of general deficit financing is that adopted by the present Government. I believe that the statement made by my right hon. Friend J. Peytonthe Member for Yeovil on 28th [column 1019]November 1973 was rather different. He then said:
“Unremunerative passenger services should be kept in being as long as they are justified on social and environmental grounds.” —[Official Report, 28th November 1973; Vol. 865, c. 398.]
My third point on Clause 3 is that grants appear to be limited, if that is the right word, to a maximum of £1,500 million over five years—an average of £300 million per year. It is difficult to justify this massive amount on the 1972 accounts, which are the only ones we have. I have been through those accounts, and, so far as I can see, in grants and loans the Government in that year gave between £150 million and £160 million to the railways. We are now asked for double that sum. In that year the grants for unremunerative services were £68 million. Those for maintenance of certain track and signalling equipment were £8 million. The grants under the 1972 (Grants) Act to compensate for price restraint were £27 million, the special grant consequent upon the July 1972 statement was £32 million, the infrastructure grant of a capital nature was £5.6 million, and the loan was £14 million. Now we face a Bill for about double that amount, or powers to subsidise up to double that amount, without any figures upon which to base our judgment.
Mr. Ronald Atkins (Preston, North)
Confirming what the right hon. Lady says, that we are trying to step up our contributions to the railways in line with what is happening on the Continent—I think that she has a point there—the fact is that help to the French railways and the German railways is respectively £500 million and £600 million. In fact, even in the Bill we are still paying very much less than Continental countries do to their State railways.
I understood from the Minister that that did not take into account the massive capital write-offs which seem to occur with ever-increasing regularity. I gave the figure for the 1968 Transport Act. There is another write-off here, and that is another way of giving away very large sums of money. We would like to have some more detailed figures upon which to make a judgment. [column 1020]
My fourth point is that the clause provides for the Secretary of State to impose on the Railways Board obligations of a general nature as regards all or part of the railway passenger system. I wonder what general directions the right hon. Gentleman will give in the interests of passengers. He can also attach conditions to the payment. Can he say whether he has any specific ones in mind?
This clause and the next one give the Secretary of State considerable powers and will subject him to endless parliamentary Questions. I am not sure that Governments are altogether equipped to exercise these powers. It is often better to exercise powers by some financial discipline. Is the right hon. Gentleman satisfied that the administrative system in the Department can formulate and proffer the requisite advice? That is no criticism of those in the Department. It is more a query about the system itself, which sometimes seems to dominate us all. We lay a duty on the Minister to give directions to those who run the railways. Those who advise the Minister what directions to give do not run railways, probably have never run railways and may well profoundly hope that they never will. Can they do anything more than check their arithmetic and tell the board that the requisite sums amount to too much? If so, would not it be better if the board had a capital and revenue budget at the outset with a sum for contingencies within which it has to keep? Is not that position different from an open-ended subsidy? The danger with the right hon. Gentleman's chosen system is that it will be a green light for maximum wage and salary demands on the ground that the taxpayers will pay, however large the bill.
According to the Economist of 15th June 1974, British Railway's contribution to the transport system is 8 per cent. of passenger miles and 19 per cent. of freight-ton miles. The rest goes via road——
Mr. Leslie Huckfield (Nuneaton)
—or air. We are voting enormous annual sums which are demanded from the many people who never use the service. [column 1021]
The Minister may reply that he has extensive capital plans to enable the railways to be used more intensively, although he did not say that today. I understand that he is carrying on the old plans with the reductions made in the December announcement.
Hitherto, we have always assumed that the railways had some kind of environmental advantage over roads. That was the position until recently. Recently we have faced the prospect of having a new railway line built. I believe that it is the first for a century. Who should be the first to object but those who live near the proposed new railway line to the Channel tunnel? Upon what grounds should they object but environmental grounds? It may be that if we use our railways more intensively, like the Japanese run theirs—I gather that their system is equal to the size of ours, moving three times as much freight and six times as many passengers—the noise, vibration and air currents become so great that the environmental advantages may go altogether, especially when we remember that we are going in for high-speed trains and advanced passenger trains and on a new line with very short time intervals between trains.
It may be that we are too ready to assume that the environmental advantages lie with the railways. As we have not put in new railways people may have got used to living beside the old system at its old timetable frequency.
Mr. Peter Snape (West Bromwich, East)
The procedures given to members of the public to object against the high-speed railway link in connection with the Channel Tunnel are different from and more generous to the public than the opportunities given to them to object to motor way development. Will the right hon. Lady say what, in her opinion, is the number of objections received from members of the public who live alongside existing railway lines compared with the number received from people who live adjacent to motor ways and heavily used urban trunk roads?
I find that there is maximum objection to proposals for a new motorway. Hitherto, we have had nothing to compare it with, since there has been no proposal for a new railway until now, and I do not think that those [column 1022]living alongside the proposed new rail link will agree that they have had more generous time or opportunity for making their protest. Part of their protest is that both the time and the methods for objecting have been far too limited.
Having made those comments about Clause 3, I come to Clause 1, which is said to reflect the new accounting system whereby infrastructure assets previously on capital account will henceforth be charged to revenue account.
As the right hon. Gentleman said, hitherto track and signalling renewal has been accounted as capital. Now it will be accounted as revenue. There is a clearly understood commercial difference. If we maintain, it is revenue. If we replace with a brand new greatly improved system—large sections of track or putting in a new signalling system with computers—clearly it is capital. There can be no argument about that.
The change is occurring for a different reason. Even if it is accounted as capital, it will have to be written off in a few years anyway, so why not write it off as we go along by accounting it as revenue? Looking at it cynically, it might not be a bad idea. But it is not necessarily good accountancy practice.
Clause 2 deals with the capital programme. I have one small technical question on it. I expect that the Minister will say that it has been the practice for years and that I did not know about it, but there is no reference in the Long Title to the increase in the borrowing powers of the Railways Board. The Long Title does not deal with it. It says:
“A Bill to amend the law relating to the British Railways Board …” . Then it jumps straight to Clause 3 and the other clauses. Is that customary?
I cannot claim to be an expert parliamentary draftsman, and the right hon. Lady has a distinguished legal past. Since the borrowing powers are part of the law relating to the British Railways Board, I think that those words enable us to amend the borrowing powers.
It may be that words in italics never get into the Long Title, and some Bills consist almost entirely of words in italics. However, normally I [column 1023]should expect an increase in the borrowing powers to the extent contained in this Bill, up to £900 million, to be worthy of mention in the Long Title. I am sure that there is a good reason. We would like to know what it is because we never think about these matters until we have to do the work involved and then we discover all kinds of small points like this.
I understand that this increase is for the same interim rail strategy as that announced by my right hon. Friend J. Peytonthe Member for Yeovil when he had responsibility. I assume that these borrowing powers are sufficient to take into account the rail link for the Channel Tunnel. However, we would like to know whether that is so.
I turn now to other activities of British Railways. One very profitable activity appears to have escaped attention. British Railways are major property owners. I understand from the 1972 report that they are one of the country's six largest landowners. The net rental income is about the same as that obtained from property owned by the Crown Estates and the Church Commissioners combined. The net receipts amount to £13.9 million. This income is obtained from a wide range of items on the rent roll.
I mention this matter to point out that there is a great deal of property in the hands of a wide range of people, because it is owned by nationalised industries as well as by pension and insurance funds.
The Bill provides further proof, if such proof is needed, that the nationalisation of an industry does not solve any of its problems. The railways have been nationalised for over 25 years, and successive Governments, both Conservative and Labour, have failed either to solve the railways' financial problems or to find a satisfactory way of reconciling reasonable freedom of management in the running of the industry with proper accountability to Parliament for the enormous public funds involved.
The Bill raises many questions and problems. It is accepted that there must be a substantial railway system. But must we always pour money in at this rate? There is no guarantee that the assets created will be used to the optimum [column 1024]extent. A significant phrase in the 1972 report, in the section on freight, states:
“The biggest loss resulted from industrial disputes …” That was referring to disputes in other industries as well as on the railways.
We would like a flourishing railway service from the viewpoint not only of those who work in and have retired from it, but of those who use it as passengers or for transporting freight.
The Government have demonstrated their willingness to take all reasonable steps to this end and to commit the tax-payer to expending large sums of money. We now have to rely on those who run and work in the industry to ensure that those who use it will receive value for money.