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Wednesday, 23 January, 2002, 14:36 GMT
Byers: On the Record
Stephen Byers
Mr Byers has returned early from his holiday
Stephen Byers: On the Record interview on Sunday 20 January.

JOHN HUMPHRYS: Stephen Byers, you told us we'd have that new Golden Age, or at least we would see real improvements at the previous election. Now, you're telling us we'll see it in time for the next election. We're entitled to be deeply cynical about that, aren't we, or at least deeply sceptical.

STEPHEN BYERS: Well I think people looking at the state of the railways today will rightly say, look come on, get on with the job, they're not good enough. And I've said I've been very clear about this, we don't have the railway system which is fit for the 21st Century and I've been taking the decisions actually, which have put in place the building blocks to create a transport system and in particular a railway system that will be radically different and an improved system than the one we've got now.

HUMPHRYS: But even if they work, it will take a very long time, that's the point I'm making.

BYERS: I agree with that. I mean there are no...

HUMPHRYS:....beyond the next election.

BYERS: There are no quick fixes. I think we...well, there will be improvements by the time of the next election, otherwise I will be in certain difficulties as Secretary of State for Transport.

HUMPHRYS: ....that's for sure, we'll look at that in a bit more detail. But let's just look at what has happened in the past. You've accepted your responsibility, you said so quite clearly, but you've only been in the job five minutes. So, therefore, it follows that other people in the government, were, should, accept their responsibility, yes?

BYERS: And they do, and...

HUMPHRYS: Do they? I haven't actually heard John Prescott saying "I hold my hand up.."

BYERS: Well, I don't know what you were doing over New Year, but even where I was, I knew that John...

HUMPHRYS: I wasn't working...

BYERS: ...that John Prescott had said that we took a gamble on keeping Railtrack going in 1997 and it was a gamble which we accepted failed.

HUMPHRYS: Well I did hear that interview and he was actually... regarded as being amazingly complacent.

BYERS: No, I don't think so. I think he was saying, look, we've gambled on Railtrack, that was a mistake, we're now taking the decisions which need to be taken to actually create a railway system which is going to be one which delivers an improved quality of service. And also in the first two years of the first Labour government, 1997-99, we did stick to those Conservative spending plans, so the additional money that we are now seeing going into railways was not available for those first two years. We needed to do that John because the public finances were in such a mess that we needed to stabilise, to get national debt down and now we've got more money which we can spend on essential services.

HUMPHRYS: But that apart, sticking with Railtrack and all the rest of it, we should have interpreted what Mr Prescott told us then as an apology should we, that was...

BYERS: He was explaining the circumstances around decisions that were taken during that first term in office.

HUMPHRYS: But it was a mistake, I mean he was saying...

BYERS: And he was very, very clear about it, it was a gamble and it didn't work.

HUMPHRYS: You will have spent less, I take your point about the state of the finances in the first two years and how you wanted to.. you were committed to sticking to the previous government's spending levels. But you will have spent less over the last five years than the Tories did in their last five years, an extraordinary thing really, given that you recognise the state the railways were in.

BYERS: Less money coming from the public sector, we've seen quite a big investment from the private sector into railways. The first term was about education and health, those were the priorities on which we were elected in 1997 and as a result of the investment that's now going in and we've had over the last few years, I think people are beginning to see improvements as far as education is concerned and improvements as far as the Health Service is concerned. We now need to do the same for transport.

HUMPHRYS: So what we saw was a period of benign neglect.

BYERS: I think we saw a period where we were trying to reflect the priorities that the people had in 1997...

HUMPHRYS: ..and the effect of that was benign neglect of the railways.

BYERS: Well no because what we managed to do, what we were doing was putting into place the framework for a new structure and that's the Strategic Rail Authority...

HUMPHRYS: ...it took an awful long time to do that..

BYERS: ...it took a number of years but we had to get legislation through Parliament.

HUMPHRYS: ...you didn't start the legislation until years in...

BYERS: ..we had to get legislation through Parliament. As I say the first priorities were education and health, we had to get legislation in those areas through quickly, which is what we did. We were criticised in some quarters at the time for doing that but it was part of the modernisation and reform agenda. What we are now doing with railways is part of that modernisation and reform agenda.

HUMPHRYS: Which I'll come to right now but just to be clear about this. You've explained why we had this period when the railways did not improve, should we see that as an apology. Are you saying, on behalf of the government, you know, I'm sorry, we maybe should have approached it slightly differently, is that what you are saying?

BYERS: I think in the first term we had priorities which the people had which were education and health and those were the ones on which we began delivery and we are seeing improvements now. What we are now doing in relation to transport is the same process, we are putting into place new structures, the investment is coming in, there's a big reform programme which will be difficult for some people, but that's the only way in which we are going to see real improvements as far as railways are concerned.

HUMPHRYS: So to finish that point, Peter Hain was wrong when he said we started too late?

BYERS: No, I think we took the right decision in those first two years to stabilise public finances...

HUMPHRYS: ..but then there's another three years after that isn't there?

BYERS: Well, what I do know and I was Chief Secretary in the Treasury when we were carrying through some of the public finance changes, is that only by stabilising and getting national debt down - remember under the last Tory government national debt was increasing dramatically. We are spending more in repayments on the national debt than we were on our school system. What we've been able to do is to cut the national debt as a result we've now got more money which we can spend on a sustained long term basis in essential services.

HUMPHRYS: Right, we'll come to that. I will take it that that was not an apology unless you wish to correct me and we'll move on to the future which is your strategic plan of course that was unveiled a few days ago and went up like a lead balloon. People did not like it, huge criticism of it, the FT, the Financial Times, said it should be read as a work of fiction. You are relying on that plan to rescue the railways in effect. In truth, it is a list of, to quote you in another context, "vague aspirations" isn't it.

BYERS: No, I think it's actually very precise and I can see you've got a copy here on the table John.

HUMPHRYS: I do, riveting reading..

BYERS: It is, and if you turn to the back you will see that each franchise area there are very specific commitments which have been outlined and time tabled as well.

HUMPHRYS: All right, well let's look at..forget the individual franchise at the moment. Let's look at the total amount that's going to go into the railways, a total of sixty-seven billion pounds over ten years. Now, that's what you told us, it wasn't new money of course, it was money that had already been allocated, but...

BYERS: ..and we were very clear about that John.

HUMPHRYS: Oh, indeed. But what you were less clear about and we read it again, it happens to be the Financial Times that has taken a very close interest in all of this yesterday, was that seven and a half billion pounds of that money was actually being double counted. So we've got to subtract that and it comes out at sixty billion.

BYERS: That's wrong actually...

HUMPHRYS: ..our old friend double counting...

BYERS: I read the FT report as well and I was as alarmed as you are clearly, John, about this, because I was insistent that we must be absolutely precise about how we present the figures. Lessons have been learned here, I can assure you of that...

HUMPHRYS: ..so there is an apology there for having done a bit of double counting in the past...

BYERS: ..no I'm saying lessons have been learnt....

HUMPHRYS: ...going to get one apology....

BYERS: ...I can see that's what you are after in the course of this interview, perhaps there may be one a bit later on I don't know. But, on the serious point, the allegation made is that there's seven and a half billion which was counted against public spending and the same seven and a half billion was counted against private investment - that's simply not the case, that isn't so.

HUMPHRYS: So what was the case then. Where...

BYERS: I think the Financial Times will have to answer for their own article..

HUMPHRYS: But where did that seven and a half billion pounds that was counted...where did that go?

BYERS: Well it is seven and half billion in the element of public spending, the thirty-three and half billion, but it is not then counted again in the private sector investment. The Financial Times will have to explain the basis of their stories and it is inaccurate to say that seven and a half billion is counted twice and that's the truth of this issue.

HUMPHRYS: Let's look at the sixty-seven billion pounds figure then. You are not going to get that sixty-seven billion pounds in truth are you because so much of it assumes...it assumes the private sector is going to put in a huge amount of money, thirty-four billion pounds and you simply cannot sit here this Sunday morning and say I can guarantee to you, that we'll get that thirty-four billion pounds, you can't do that can you.

BYERS: What I can say and we saw it again in the introduction film, is the allegation that the private sector is walking away from investing in railways because of my decision in relation to Railtrack...

HUMPHRYS: ...assumption that they will I think is perhaps a better word...

BYERS: ...no, because what I think is important to recognise is that the City knows there is a clear difference between the failed privatisation that was Railtrack, you know a company quoted on the stock market and the sort of public private partnerships that we want to have in relation to the railway system. The two are quite different and people and investors in the City can make that distinction and all of the signs are that they want to be involved in the projects...

HUMPHRYS: ...are they?

BYERS: ...which are outlined in the strategic plan...

HUMPHRYS: ...are they? Well, I'm not so sure about that. I read the man from Standard and Poor's and as you know Standard and Poor's are the sort of gold standard in determining what credit companies are like and all the rest of it and being very sniffy about it, just yesterday, in a piece that I read, and he was saying in effect that there must be absolutely no political interference, that the independent regulator must have full jurisdiction as used to be the case and if that is not so, then the City will have no confidence in it at all.

BYERS: I think they want to see the successor company to Railtrack and to get away from the uncertainty which we have at the moment because the administrator has to go through his legal obligations. But that's a quite different issue John I think from the question about whether or not the City will invest in public/private partnerships and what we saw just on Wednesday of last week, when the GNER were awarded an extension, two year extension to their existing contract on the east coast mainline, a hundred-million pounds of private sector investment in improvements as far as that was concerned. So the private sector will be involved, because they recognise that there are opportunities for them in the process that we've put together.

HUMPHRYS: Well but that isn't the message that was coming across from the people we spoke to in that film, no matter, whether you're talking about Sir Alastair Morton or George Cox or whoever, or indeed the man from Standard and Poor's. They're saying look, we've got a number of problems with this, one of them is that it's not going to make any money, the other is that if it doesn't make any money we can't absolutely be certain that the government would bale us out, if they did bale us out then that would be fine, but you can't offer any guarantees on either of those bases, can you, ........you won't guarantee their debts otherwise it would be nationalisation and so on.

BYERS: We're moving away from the situation where the government would be regarded as sort of guarantor of last resort to the private sector. The private sector can be involved in public sector provision provided it adds value and to be quite blunt, it's a means to an end. We involve the private sector when they can improve the quality of public services which are being delivered, that's the basis on which we operate.

HUMPHRYS: And the private sector says to you, fine, now there is a risk involved here, clearly, there is, in their view, especially bearing in mind what happened to Railtrack under your tutelage, there is a very very real risk indeed. Now, either you increase the income that we are liable to get, but of course if you were to do that, you would have to push up fares, are you prepared to do that?

BYERS: Well you're assuming that the model that replaces Railtrack is going to be the same as Railtrack.

HUMPHRYS: We have to assume something because we don't know what it's going to be.

BYERS: Well, you don't, but in due course, and basically, I mean people say, why is it taking so long? This administration, you know, three, six months, is it going to take longer? And we...

HUMPHRYS: ...and it is isn't it? It's going to take at least a year, it could even be two years I've heard.

BYERS: I think it's unlikely that it'll be taking, people talk about two years, eighteen months. Those people have got a vested interest to say so because...

HUMPHRYS: ...well tell me how it'll be then?

BYERS: ...either they're disgruntled shareholders who want the government to pay compensation, or they're the political opposition who will make these points. It's going to be for the administrator to decide, he has legal obligations...

HUMPHRYS: ...you talk to him, I mean you've a pretty clear idea.

BYERS: Well what I want to do is to make sure that coming out of administration will be a successor body to Railtrack which will be focused on putting the passengers first and won't have the baggage which Railtrack had. Now, that will take time, but we're unravelling here what was an enormously complicated failed privatisation. Now I make no apologies for doing that, you know, Railtrack came to me in the Summer, wanting more money, we looked at the situation, we took a decision that no more public money would be provided to Railtrack, they've got billions over the years and have failed to deliver and as a result of that they were put into administration by the High Court. Now I have choice really, you could tinker around at the edges and muddle through, which sometimes people do, or take some of...

HUMPHRYS: ...your predecessors for instance..

BYERS: ...no I'm not saying that. But you could take some hard decisions for which you'll get political flack, as I've done over the last few months, but it's those decisions which are crucial if we are actually going to improve the railway system in our country. And it would have been easy just to sort of take the soft option, say well here's more money, no reform, we'll just muddle through. But that's unacceptable, because there's an issue here that does need to be tackled, it's not just in railways actually, it's across the whole area of public services, we're putting money in, we've got to have reform as well.

HUMPHRYS: The trouble is, as a result of what you've done, you have created massive uncertainty, you wouldn't argue with that. I mean you acknowledge that there is uncertainty because we don't know what will come out of it.

BYERS: I accept that.

HUMPHRYS: Yes. And one of the points that Iain Duncan Smith made in an interview this morning, is that because you have done that and because the City now regards you with deep suspicion, we are not going to sort this out unless you go, you personally go.

BYERS: Well Iain Duncan Smith would say that, wouldn't he, that's no great surprise, but I'm here and I'm going to try and deliver on this agenda. But on the point about risk and the private sector approach to putting in investment, the private sector do see a real distinction between the risk that was associated with a publicly quoted company like Railtrack and the risk that's linked into the public/private partnerships that we want to use to implement the strategic plan.

HUMPHRYS: But only if you are able to say to them we are removing the normal commercial risk. I mean what you've not been able to do and nobody's been able to do it, is rewrite basic commercial...

BYERS: ...yes, these are con...

HUMPHRYS: ...capitalistic...

BYERS: ...and these are contracts which are entered into between the government and the private sector.

HUMPHRYS: ...but the fact, looking at it very very simply indeed, a company, a bank, or an investor of any sort says, I will put money into that if I can get a decent rate of return.

BYERS: Absolutely. And it's contractually assured. I mean this...

HUMPHRYS: Ah. Well now, contractually assured but the lender of last resort, or the guarantor of last resort of course is the government in this particular case.

BYERS: ...but it's the same, it's the same in all of these PFI...

HUMPHRYS: ...but you're not prepared to say we will guarantee any losses that you might make as a result of it, you just told me you can't do that...

BYERS: ...no well that's one of the attractions for the government and public/private partnership is that commercial risk transfers over, but if provided that, provided they deliver on the contract, they get the benefits of the terms of that agreement, and that is quite different, where there's a contractual relationship between the government and the private sector, which is how public/private partnerships are based compared to the whole question of the private sector buying shares in a company like Railtrack. The two are quite separate.

HUMPHRYS: Except that the company, the investor still has to make that profit and the point that Sir Alastair Morton made there was that if you can't have the situation where the government's going to be the guarantor of the, going to guarantee the potential debts, then you've got to increase income. Now are you prepared to say, because this'll worry passengers of course, because the only way to increase the income would be to push up the fares or the rate charge, or freight charge or whatever it is...

BYERS: ...or increase the subsidy...

HUMPHRYS: ...or increase the subsidy. Well you've already told me you're not going to do that, at least I understood you say that, correct me if I'm wrong?

BYERS: No, you're right.

HUMPHRYS: I'm right. So there's no more government money coming in, therefore the only other way of increasing income is to push up the fares, now there are understandings at the moment, are you prepared to say, we will not push up the fares in order to provide a better rate of return for potential investors.

BYERS: That's not the basis on which the strategic plan is based. There are two quite...I'll try and explain this, there are two quite separate issues here. There's the company which runs the lines if you like, which is Railtrack Plc at the moment...

HUMPHRYS: ...and then you have the train operating...

BYERS: ...the licence operators and then we've got train operating companies and freight. I think Sir Alastair Morton's comments were in relation to the licence operator, Railtrack Plc. There are separate issues there about how they're funded to make sure the tracks and the signalling are maintained properly and effectively. Now that will be done through grants from government and also from what's called the 'track access charges' and they have two streams of income if you like. What we're saying now is that the successor to Railtrack should be focused purely on renewals, operations and maintenance. The big infrastructure contracts like the west coast mainline, will not be the responsibility of the new successor body, they will be special purpose vehicles, new financial arrangements, which will be contractually underpinned and the government will make a contribution as part of those contractual obligations.

HUMPHRYS: Alright, well let, it is a complicated area of course, but let's assume, and I insist that many people believe this is a wrong assumption, but let's assume that you do get all of that money that you talk about in the strategic plan. It's still not going to be enough is it?

BYERS: Well it is a hugely increased amount from what we've had in recent years.

HUMPHRYS: It's a lot of money, nobody disputes that, but it's not gong to be enough, is it?

BYERS: Well I think it will be to deliver a real improvement to the quality of the railway system that we're seeing. We're talking about billions of pounds a year going into railways, money which has not been there in the past, I mean the railways, like many of our crucial public services have suffered from generations of chronic under-investment, we're changing that now, we're changing it in health, in education, the fight against crime, we're changing it for railways and transport as well. And as we invest that money, we've got to make sure that we get the reforms in place as well. What I don't want to see is more money going into railways under the old system and not seeing the improvements that the travelling public want to see, so we've got to invest in reform and insist on results, that's not just in relation to railways, but actually if you look across the whole of public services, but the big challenge is, put the money in and insist on reform as well.

HUMPHRYS: But is you look at what Brian Staples, the Chief Executive Officer, the guy who runs AMEY, that big, big contract company that does all the contracting, and he says, I quote, "I'd be surprised if it" the sum that's in the strategic plan, "I'd be surprised if it came anywhere near what needs to be spent". Well there's a man who knows exactly how the railway works, because he's involved in it all the time, his company.

BYERS: And probably a man who'd like a little bit more money coming into his company as a contractor, so he....

HUMPHRYS: Indeed, but then there's nothing in it to upset you is there?

BYERS: ..but there may be a reason why he's there making the case for need for more money to be spent on railways because he wants his company to get a bigger slice of the cake...

HUMPHRYS: ...but he's not alone, is he?

BYERS: Well I think there are issues about the funding or railways, but I do believe that the money we've got in the ten-year plan, you know, tens of billions of pounds, provided it's linked to the reform programme will make a real difference and raise the quality of the railways in this country. I mean, passengers want some very simple things, they want trains that are not cancelled, they want them to arrive at their destination on time, they want them to be safe, they want them to be clean and comfortable, and those are the priorities and that's how we'll be judged on how we improve in all of those areas.

HUMPHRYS: Well let's just try to sum up that bit then by saying, no more subsidy from the government, over and above what the strategic plan tells us about, no more of that, and as far as the train operating companies and all the rest of it are concerned, no big increases in fares to raise more money for them.

BYERS: That's true. That's not the basis of the strategic plan.

HUMPHRYS: That is good. So passengers who saw their fares shooting up in order ultimately to pay for it, would be entitled to say, the government cheated us, lied to us.

BYERS: Well, they'd be entitled to say, this was not in the ten-year plan, because that's the truth of the situation.

HUMPHRYS: And that ten-year plan is now fixed. That is, that's there, that's solid, that's in concrete?

BYERS: The obligations are there. I've said though I want it reviewed every year, because there's no point in having a ten-year...

HUMPHRYS: ...so it's not really a ten-year plan then?

BYERS: Well, it's a ten-year plan as we sit here today, but it's got to be flexible John, because if you set it...

HUMPHRYS: ...so there might be a different ten-year plan this time next year?

BYERS: It'll be the same ten-year plan, but we'll review in the light of...

HUMPHRYS: ...so it might be different, but the same?

BYERS: Well, we'll explain. We'll give a review, if you like, a year on. What we've been able to achieve, and what we're going to do in the future. Because the importance of the ten-year plan, if I can just say this, is that it breaks down very precisely, and it's quite worrying for a politician, this degree of detail, what will be achieved the end of this year, what will be achieved by the end of 2005, very important, that may be the time of the next election, and what will be achieved by 2010, very precise commitments being made in the ...

HUMPHRYS: And what about fragmentation of the railways. Everybody agrees it's completely bonkers, twenty-five different train operating companies alone, what ought it to be? What would be a sensible pattern, sensible shape for the railways?

BYERS: Well I think you're right to point out that we've inherited a system where we have this terrible fragmentation, and as a result, it's almost a bit of a blame culture, and one of the things that struck me when I came in...

HUMPHRYS: Surely not in politics?

BYERS: I think, well not just in politics but in the railway industry. The people were blaming one another for the failings of the system but were not prepared to take responsibility themselves.

HUMPHRYS: So what do you think it ought to be? We've got twenty-five for instance train operating companies, two, three, four, one?

BYERS: Well what Richard Bowker has said, who's the new Chairman of the Strategic Rail Authority, there does need to be a reduction, in the number of franchise operators...

HUMPHRYS: ...big reduction?

BYERS: ...a significant reduction.

HUMPHRYS: And he could see it ultimately theoretically going down to one, could you?

BYERS: I couldn't see that, but I think there will be a reduction, significant from twenty-five, I wouldn't like to put a precise figure on it. But what we need to have is a new franchise map, where the winners of the franchises are pushed to deliver real improvements and the franchise process is one of the key levers that we have to drive up standards and we should use it. It hasn't been used to that effect in the past, but the new franchising regime which has just been announced as well, will have at it's heart, the need to improve the quality of service, to upgrade the lines and to give a far better travelling experience to rail passengers.

HUMPHRYS: Let's have a look in the closing minutes of this discussion, at London Underground, where you want again a public/private partnership. Many people say it's completely crazy the way it's going to work, it'll just be another way of the whole fiasco of Railtrack's going to be repeated, the railways going to be repeated Underground. You seem over the last few weeks to have been suggesting that it's possible you might have second thoughts about that, but in truth it'd be far too embarrassing for you to have second thoughts at this stage, wouldn't it? Anyway, you're about the embark on your great sort of road show with Tony Blair, I gather?

BYERS: Well, no second thoughts, but last June, once again, when I came in, I said there are three things that have to be satisfied for the public/private partnership for the Underground to go ahead...

HUMPHRYS: Value for money

BYERS: Value for money, which is, we're just about to do the test. Safety must not be compromised, so the Health and Safety Executive will determine whether the system is safe, not a politician, not Ken Livingstone or myself, but the Health and Safety Executive, and thirdly, that there will be no privatisation of London Underground. So this is not a Railtrack for the tube, as some people have said. London Underground will continue to be publicly owned. What will happen is that they will enter into contracts with the private sector, but it'll be the private sector working for London Underground, now the only point in going ahead with it is if these three private contracts deliver value for money, now if they don't deliver value for money, and we'll know over the next few weeks, then the public/private partnership will not go ahead, and that's not a U-turn John, that just reinforces the points I made last June.

HUMPHRYS: Right, but if they come back and say, well we're not absolutely convinced, I mean, it doesn't even have to be a great ringing endorsement in other words, if they say, 'if, er, a bit dodgy really, possibly' you'd say, alright, we won't do it. I mean it's just as simple as that.

BYERS: No, what we're going to do is, probably the second week in February, we will release all the information, I'm getting independent review from Ernst and Young about whether it will be value for money, and there'll be a three-week period where everybody can look in detail at whether or not these secure value for money and then a final decision will be taken, so that..

HUMPHRYS: ...that three weeks gives you the chance to pull away from it?

BYERS: Well I think we're just being very open and transparent, and I think it's a good move to actually allow the public to look in detail at how public private partnerships work in practice and that's precisely what we intend to do, because if they don't achieve value for money, then they won't go ahead.

HUMPHRYS: Because at the moment the handover's supposed to take place on, what April 1st is it?

BYERS: It's probably later than that to be honest. April 1st was always a sort of early date.

HUMPHRYS: ...so when, when might it...

BYERS: ...probably during the Summer I would have thought...

HUMPHRYS: ...during the Summer?

BYERS: Mmm.

HUMPHRYS: Summer's a long time. Could slip into what September, October?

BYERS: Summer's not a very long time in this country John.

HUMPHRYS: It does depend, September, October?

BYERS; Some time after April and it would be foolish to try and say precisely when.

HUMPHRYS: But it may not happen, you're really asking us to believe that it simply may not happen, after all the great rows there have been, it may not happen.

BYERS: The important thing I think is that if we don't go ahead with the PPP that we move quickly to make sure the investment goes in. I mean, my sort of motive here, is once again, with the London Underground, like the railways, and like other public services, there have been generations of under investment. Now I happen to believe that we have got a once in a generation opportunity here to improve our public services, because the money is there for education, for health, for transport, for railways, for the tube. What we've got to do is to use this opportunity to invest that money but make the reforms that are necessary. Some people will oppose that, but it has to be done if we're going to have world class public services which is what our people want.

HUMPHRYS: Stephen Byers, thanks very much indeed.


This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy.
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