Passenger Railway Services (Public Ownership) Bill

Debate between Lord Young of Cookham and Baroness Randerson

Report stage
Wednesday 6th November 2024 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, Amendment 9 in my name would require an annual report on public operator liabilities. This might sound rather a dry subject with which to lead the last group on Report, but it is an important one, as it has the potential to totally disrupt the Government’s ambitions for Great British Railways. I begin by thanking the Minister for the meeting that we had last week with the noble Baroness, Lady Blake. He listened patiently to my concerns and was able to allay some of them—though not, I am afraid, this one.

This amendment has grown in prominence since last week’s Budget with its clear fiscal rules, and these were needed to give confidence to the markets that the Government could borrow the substantial sums needed to fund their expenditure; we will debate all that on Monday. In a nutshell, my concern is that, if liabilities which are currently off the Government’s books cease to be off balance sheet, we will revert to the position when I was Transport Secretary, with transport bidding for investment against schools, hospitals and defence and always missing out because of political priorities.

I believe the noble Lord has conceded the risk of this happening, because he has said repeatedly that it will be for the Office for National Statistics to decide in the future how GBR liabilities impact the public sector balance sheet and, specifically, public sector net debt. However, it simply cannot be prudent for the Government to embark on a programme of nationalisation without fully understanding the financial consequences of the ONS classifying GBR as “central government” and without taking the necessary precautions.

We can have a shot at what the ONS will do, because it has stated that in circumstances such as GBR it would run what is called the market body test, and we know that GBR, as the Government envisage it being structured, would fail that test. The integration of track and train within a single entity, as set out clearly in Labour’s Getting Britain Moving document, will mean that GBR will fail the ONS market body test, meaning that its liabilities will be consolidated into the department’s accounts. The Minister has argued previously that the position will not be different from where we are now, but it will be. The creation of GBR as a permanent public monopoly will create a completely different system, which will change the way in which the ONS categorises expenditure.

The Labour document is clear that GBR will be a “single employer”. If so, it will simply fail the market test and its accounts will be classified as “central government”, rather than a public corporation, as LNER is currently. The accounts will then be required to be consolidated into DfT’s accounts, like other bodies that fail the market test, and then classified as “central government”. Crucially, these different accounting treatments will make investment, for example, in rolling stock harder, as it will be in competition with other demands for public investment. The Minister has made it clear that GBR will use its purchasing power to commission new rolling stock through the roscos: rolling stock that will then be leased to GBR. He stated:

“GBR will enable a longer-term view of the rolling stock market, and it will reduce the margins it needs to make”.—[Official Report, 23/10/24; col. 736.]


Those long-term liabilities, totalling potentially some £15 billion, will score immediately on the Government’s balance sheet, increasing national debt, even if the money to manufacture the trains comes from the roscos and is raised on the capital markets.

What I hope the Minister has done—and if he has done it, no one would be happier than me—is get an undertaking from the Treasury that, if the ONS so classifies GBR debt, the Treasury will ensure that the DfT is insulated from that decision. He may have such a letter in his breast pocket. If he has not, we know what is likely to happen because it happened to Network Rail, which was reclassified by the ONS in 2014. The Minister said at our meeting that there was scope for economies at Network Rail when it was reclassified, and I am sure he was right. But those measures were never going to compensate for all the consequences. Network Rail had to divest £1.8 billion by selling property assets; it had to defer renewal works; it had to postpone completion dates; and it had to renegotiate a lot of contracts. Do we honestly want that to happen to GBR?

So, in a nutshell, I am concerned at the gamble the Government are taking with the future of the railways by going back to the pre-privatisation system, where Ministers will have to compete against other spending departments for what the railways need. I beg to move.

[Baroness Randerson (LD)]

My Lords, I have one very brief question for the Minister, following the warnings by the noble Lord, Lord Young. Have the Government looked at this from the point of view not just of what I would call the finished product of the nationalised railway system but of how the categorisation of a mixed economy would work? We, the nation, will be in a situation of a mixed, some-and-some economy for a significant number of years to come.

Passenger Railway Services (Public Ownership) Bill

Debate between Lord Young of Cookham and Baroness Randerson

Committee stage
Monday 21st October 2024 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I support the point made by the noble Lord, Lord Berkeley, about the potential conflict of interest under the new scenario: we will have Great British Railways, with a single operating mind, carrying all the revenue risk for passenger train operations, while at the same time there will be open-access operators and freight operators bidding for a limited path on the railways.

The former Secretary of State said:

“I shouldn’t need to approve whether a passenger train ought to be removed from the timetable to allow a freight train to run instead, as I was doing earlier today”.


The question is: who is going to make that decision in the future? If it is going to be GBR, as the noble Lord, Lord Berkeley, said, there is a clear conflict of interest; the company would have an interest in the passenger train operator having precedence in order to secure the revenue. That may be in conflict with government policy, which is to promote the transfer of freight from road to rail. Surely it is important that at the moment, the train operator cannot insist that he has a particular path for his train: he has to bid either to Network Rail or to the ORR. Who is going to make that decision in the future? Will it be a domestic one within GBR? In which case, how will the conflict of interest raised by the noble Lord, Lord Berkeley, be resolved in a way that is satisfactory for both the open-access operator and the freight train operator, which may find that they do not have the paths they wanted?

[Baroness Randerson (LD)]

My Lords, this small group of amendments addresses a number of issues that inevitably raise questions, because this very tightly drawn Bill provides no hint of how they are to be dealt with. I participate in this debate with some temerity following contributions by the noble Lord, Lord Berkeley, and my noble friend Lord Bradshaw, who know so much detail about the freight industry.

Liberal Democrat Amendments 40 and 41, to which I have added my name, are therefore probing amendments looking for details of government plans, which I hope the Minister can supply today. There are thousands of jobs and potentially billions of pounds of investment riding on the Government’s answers to these questions.

Amendment 40 is about a very specific issue but, as my noble friend Lady Pidgeon has emphasised, the role of the British Transport Police is vital, providing the rule of law on our trains. It is important to remember that the rule of law provides consumer and passenger confidence. Those of us who are older, younger or weaker are particularly dependent on the good offices of the BTP because they provide the assurance that people need before they are prepared to travel on our trains.

I emphasise that, as my noble friend said, British Transport Police funding has been provided virtually unseen from within the industry for a very long time. The total amount of money, at nearly £500 million a year, is not inconsiderable. It is therefore important that we have a clear answer now from the Government about they intend to deal with BTP in the future. In particular, how will it be overseen? Will that be with independence and at arm’s length from the Government? Which body will do that supervision?

Amendment 41, on freight, deals with a much more substantial and complex issue, because the freight industry is so complex. As the noble Lord, Lord Berkeley, said, it is essential that the new system be set up to encourage rail freight to improve its efficiency. That will be difficult, as he emphasised, because a centralised, nationalised Great British Railways will be bound to feel pressure to prioritise passenger services. We have crowded tracks running at capacity. We have vocal passengers who want trains at a time and a frequency convenient to them. We have a Government who have sponsored a nationalisation project, and their reputation will be damaged if passengers’ interests suffer. We also have a Government who emphasise that they are facing a financial black hole. Will they be willing to invest in track and signal modernisation of the sort outlined by my noble friend Lord Bradshaw, to benefit freight rather than passengers?

I fear that freight could rapidly become a poor relation, so I am keen to hear details and reassurance from the Minister. I thank him for his letter, but I point out that it says that next year’s railways Bill will “enable” the growth of freight. I emphasise that I would much prefer a duty to promote the growth of freight, rather than simply enabling it.