HC Deb 12 November 1973 vol 864 cc163-203

10.18 p.m.

Mr. Robert Sheldon (Ashton-under-Lyne)

I beg to move Amendment No. 2, in page 1, line 8, leave out paragraph (a):

The Deputy Chairman

With this amendment we are to take the following amendments: No. 3, in page 1, line 9, after 'may' insert 'propose to'.

No. 4, in page 1, line 9, leave out from 'guarantee' to first 'the' in line 10.

No. 5, in page 1, line 10, leave out 'and the payment of interest on'. No. 15, in page 2, line 33, after 'guarantee' insert: 'has been negotiated but before it'. No. 17, in page 2, line 34, after second 'the' insert 'proposed'.

No. 20, in Clause 2, page 3, line 13, after second 'section' insert: 'or under subsection (1) of section 1 of this Act'.

Mr. Sheldon

Paragraph (a) concerns itself with the guarantee that is to be given by the Treasury to the private interests which are to construct the railway tunnel system. Amendment No. 2 covers the general question of the guarantee and I wish to raise only one small point of clarification on it. This concerns the sums borrowed relating to the work done, as it is put in the Bill— before or … during the initial period". As I read it, this means expenses incurred before the passing of the Bill. I should be grateful for an explanation of how much is involved.

I am not wedded to the precise wording of any of my amendments. I hope that in my explanations the intention will be clear. If there is any omission or lack of clarity, as is inevitable in comparison with the expertise available to the Minister through his parliamentary draftsmen, and if the general point is accepted, I hope that the Minister will introduce such wording as he thinks would be an improvement upon that which was available to a back bencher with limited resources.

Amendment No. 3 deals with the guarantee of sums borrowed by private interests. One thing which must make us sceptical—in fact suspicious—is that we are asked to empower the Government to make payments of these amounts before we know the precise nature of the agreement.

As long ago as 8th August 1972 the hon. Member for Canterbury (Mr. Crouch) asked when the Secretary of State for Trade and Industry proposed to make more references to the Monopolies Commission, and the then President of the Board of Trade replied: My right hon. Friend has decided to make three new references to the Monopolies Commission. They relate to cross-Channel ferry services …".—[OFFICIAL REPORT, 8th August, 1972; Vol. 842, c. 402.] It is about 15 months since that reference was made to the commission, yet we still have not received the report. We know that the commission does not move at a great pace, but it is likely that not many more months will pass before it reports. The report will have a considerable bearing on the profitability of the Channel Tunnel, and hence upon the nature of the Government guarantee. Therefore, although the right hon. Gentleman is invoking the use of private capital in order to be able, as he sees it, the more effectively to monitor public expenditure in this area, he knows, or should know, that the profitability of the enterprise will largely be decided by the Government themselves.

If they make the guarantees and find that despite them the companies will not succeed in producing a profitable venture, the Government will be forced either to let the venture fail or to take certain action based upon their powers, the first of which is to determine the tolls. If they do so, the profitability of the scheme from which the private interests will benefit wil lalso be determined by the Government.

The profitability, and hence the prospect of not having to call on those guarantees, will depend on the amount of competition, which is determined by the Government, because when the commission finally makes its report the Government will have to decide whether to take action to reduce the extent of the monopoly held by the Channel ferry services.

If the Government decide to increase the amount of competition, and so bring down the charges of the ferry services, that will have a substantial effect upon the profitability of the tunnel.

The availability of a good road system will depend upon the profitability of the Channel tunnel. If the Government decide to spend considerable sums of money on improving the road facilities leading to the tunnel, it must be expected that more people will use the tunnel, and so make it a greater success.

If the Government decide to spend money on improving the rail links and the terminals, they will be improving the prospects for the tunnel.

All that is irrespective of what the private interests do. It does not matter how efficient or inefficient they may be; the Government will decide by their very action how much profit accrues to those private interests. The converse holds, because if they decide not to permit greater competition and not to build the roads and rail links and terminals—in other words, if they decide to starve certain peripheral services for the Channel Tunnel—the scheme will not be successful.

The consequence of all this is that private capital is at the Government's mercy. Knowing the financial expertise of these bodies, we must assume that they are aware of that. They know that they are at the Government's mercy, and when they make their calculations about the profitability which they will require they must have in mind what the Government intend to do. If that is so, the Government should tell the House of Commons what they intend to do and how they intend to work.

But the important point is this. When the Government see the private interests, they are not getting an independent assessment; they are looking in the mirror. They are getting a reflection of their own intentions. When they say that this 10 per cent. gives them some objectivity, the only objectivity is that of the looking glass. They are deluding themselves if they think that the measures which they propose to bring in the private interests give them any advantage over what they would have if they went 100 per cent. into the scheme on their own account. The least that the House of Commons can do is to retain some control over the operation of the Channel Tunnel scheme by means of limitations for which the amendment provides.

I propose in Amendment No. 3 that the proposal to produce the agreement must be subject to the approval of the House of Commons. What the Minister is saying is, "Give us the money and we will work out a scheme which will be acceptable to the Government and to the private interests." If hon. Members agree with me, they will say that that is not enough because, the private interests being only a reflection of the Government's intentions it is not an independent examination, and the only independent examination which the House of Commons should accept is the examination which can come from the House surveying, agreeing and certainly scrutinising the agreement.

Amendment No. 4 proposes to remove from the Bill the qualification that the guarantee to the private interests shall be in such manner and on such conditions as they"— the Treasury— think fit". That allows the Treasury to guarantee the moneys, both capital and interest, in such manner as it wishes.

I wish to ask the Minister a few questions and I shall be much obliged if he answers them before the debate concludes. I shall not go into the matter of the names of the members of the private group because I hope to deal with it on a subsequent amendment, but I should like the right hon. Gentleman to tell us something about the conditions he expects to lay down and about the basis of the guarantee and what the Government intend to do to obtain agreement.

10.30 p.m.

The House will have noted the comment in paragraph 11.19 of the White Paper on the Channel Tunnel, which was published in September. That states: Hambros Bank Limited,"— it is not one of the members of the private group, so it is known that it is acting quite independently of the group itself— who have acted throughout the negotiations as the Government's advisers, consider these terms"— and these are the hypothetical terms that are in the immediately preceding paragraph— to be fair and reasonable in relation to the need to raise money in the market. I suggest that the need to raise money in the market is not necessarily the main criterion. What is needed is some degree of objectivity, and not the raising of money at the Government rate.

Amendment No. 5 is concerned with the payment of interest on the Treasury guarantees. We know that, under the unamended Bill the loan of the principal will carry some interest which the Government have given themselves the right to pay to the builders of the Channel Tunnel. But if the private interest has any standing at all, I should have thought that one could expect it to include in its charges enough to guarantee the interest. If it cannot do that, then even the Government ought to be contemptuous of the private involvement which they are seeking. I shall be pleased if the Minister will comment upon that point.

Amendment No. 15 is a more substantial amendment which deals with the need to obtain from the Treasury an understanding that it will not have power to dispose of the money before the Government have come back to this House. It will mean that the Government are enabled to undertake negotiations with the principal parties and to come to an agreement, but will then have to come back to this House to have that agreement ratified. If the Government believe that they have the basis of a fair and reasonable agreement, it is asking very little to say that the Government should come back to this House and lay that agreement before it, to say, "This is what we have achieved", and to ask for the approval of this House. We know that the statement of guarantee will be laid before each House of Parliament, although we are not quite sure how detailed that statement will be and what will be in it.

An amendment which has not been selected, and I shall therefore refer to it only in passing, deals with the need for a full statement of the guarantee.

Much more important is the need for the House of Commons to see the agreement which is to form the basis of the guarantee and then to approve it afterwards. The Government cannot be so worried about their majority as to want to make sure that they get the guarantee in advance of our seeing the agreement. I fail to understand why the agreement should not be negotiated in advance of coming to the House. Instead of the Government asking for the money and then deciding what to do with it, I fail to understand why they could not have had the agreement first and then come to the House. At the very least, there should have been a provision in this legislation to the effect that before final approval was given the Government should be obliged to return to the House and, in a brief debate of 1½ hours, to explain why the agreement was satisfactory and, consequently, to secure the agreement of the House.

Amendment No. 17 is consequential upon Amendment No. 3. Oddly enough, Amendment No. 20 which has been selected was intended to be consequential upon an amendment which has not been selected. It was to provide for a guarantee to be exercisable by statutory instrument subject to annulment. However, I shall not go into that in detail. It was a consequential amendment which has been covered by another that I have discussed.

I return, then, to Amendment No. 2 which is the embracing amendment under which the other points of detail are subsumed. I find this guarantee unsatisfactory. There are a number of objections in connection with the rôle of the private interests. In this and other debates, it will be necessary to go into the rôle of these private interests and the reason why they are regarded as such an important element in the whole of this Channel Tunnel scheme.

[Sir RONALD RUSSELL in the Chair]

The Minister for Transport Industries (Mr. John Peyton)

I am afraid that I cannot advise the Committee to accept these amendments. The hon. Member for Ashton-under-Lyne (Mr. Sheldon) was a little coy about coming to them in the first instance. However, perhaps I might deal briefly with their effect.

I agree that Amendment No. 2 stands on its own. The effect of it would be that the Treasury could not give any guarantees. But the French Government would still be able to do so. We would be bound by the treaty to meet 50 per cent. of any payments. In other words, we would be bound by French guarantees rather than by our own. We would also have power to meet the guarantees made by the French Government under Clause 1(2).

I do not think that that would be very sensible, and I choose my words with care when I say that. To leave ourselves without the power to give guarantees ourselves would be worse than not very sensible. It would put us into a ridiculous position where we should not be able to go ahead with the project. I have no doubt that that is the objective of the hon. Member for Ashton-under-Lyne, whose hostility to the project has never been in doubt.

The hon. Gentleman referred to the preliminary work on or in connection with the construction of a railway system under the Channel. That is money raised under Agreement No. 1 which was placed in the Library of the House last November.

Amendments Nos. 3, 15, 17 and 20, so far as any kind of affiliation procedure is possible, can be seen to have come, roughly speaking, from the same parentage. They can conveniently be dealt with together.

The Bill as it stands is in normal form. When guarantees are made it is the usual procedure for the Treasury to lay a statement as soon as possible after the guarantee is given. In effect, the amendment would require the statement to be laid just before the guarantee is given. That would be a pointless exercise. The foundation appears to be that each guarantee should be preceded by an order which would be subject to negative resolution procedure. The purpose of the amendment is not achieved. I do not feel able to respond to the hon. Gentleman's invitation to put a better verbal garment upon his intentions as I have no sympathy with them.

The hon. Gentleman asks why the Government are not prepared at every stage, whenever a guarantee is laid, to allow the Treasury to make a statement beforehand subject to the negative procedure. The answer is simple. On the whole, having gained the authority of the House in principle and in detail for going ahead with the project, we would not wish it to be subject to regular hiccups of doubt all the way along the line. Nobody knows better than the hon. Gentleman how easy it is to delay progress even of the most laudable projects. I advise the Committee that the amendment should be rejected.

The hon. Gentleman then raised the question of the guarantees. The effect of the amendment would be to make the guarantees unconditional. I understand that this is purely an exploratory matter. He first said that Hambros must be presumed to be acting independently and then said that it probably was. All along Hambros has been totally dissociated from the project. I am sure that the hon. Gentleman did not mean to suggest the contrary. It is acting in a perfectly proper manner as an adviser to the Government. It seemed reasonable that the Government should seek the advice of a merchant banker which is independent from those who are involved. The advice has been that the conditions of guarantee are fair and reasonable. That is why we had resort to Hambros and that is why we accept its advice.

All I can offer to the hon. Gentleman about Amendment No. 5 is that the power to guarantee the payment of interest as well as repayment of capital is both normal and essential. Anything else would be unworkable. The money will be raised on fixed interest from institutions. We require either a full guarantee or an interest rate which takes account of the risk of loss of the Government as recipients of the top slice of the profits.

Mr. Sheldon


Mr. Peyton

I advise the Committee that the acceptance of this series of amendments would only defeat the purpose of the Bill and would not achieve the hon. Gentleman's purpose.

Mr. Frederick Mulley (Sheffield, Park)

It might be convenient if I state briefly the Opposition's view of the amendments. My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) has been diligent in seeking to improve the Bill or to make the Opposition's opposition to the Bill more effective. I am bound to tell the Committee that in the debate on the White Paper and on Second Reading we made it clear that we would oppose the Government. On the Government's figures as to the outcome of the tunnel, we were opposed to the concept of a Government guarantee.

I do not think that a tightly drawn financial Bill of this sort can be amended in any sensible way. To delete subsection (1)(a) would mean that there would be no Bill. Having voted against Second Reading, I am content to leave it there. Equally, I do not see any merit in going again into the discussion about independent inquiries, because we gave the House that alternative to the Government's proposal in the debate on the White Paper and the House, rightly or wrongly—I believe wrongly—turned it down.

10.45 p.m.

Mr. Sheldon

I very much deplore the inadequate reply given by the Minister. This is the first chance we have had to go into this matter because the right hon. Gentleman has denied the House the opportunity of a close examination through a Select Committee or in any other way. It might have been regarded as reasonable for him to have come to this Committee and given reasonable answers to the detailed questions that have been put. This has not been going on for a short time. This is symptomatic of what has happened over the past 10 years. When I tabled these amendments it was not in an attempt to score simple points. It was a reasonable attempt, I thought, to get answers to reasonable questions that had been thought out over a long period.

It might be thought that the Department and the right hon. Gentleman, knowing well where I stand, had decided that I am not to be placated and as a consequence not to be answered properly. Therefore one assumed that the right hon. Gentleman and the Department knew my point of view thoroughly and saw no purpose in going forward to it. If this was so how is it that on 8th November the right hon. Gentleman said: The hon. Gentleman"— referring to me— has frequently suggested that there should be not a bored tunnel but a bridge."—[OFFICIAL REPORT, House of Commons, 8th November, 1973 Vol. 863, c. 1240.] If there is one thing on which I thought I had convinced the House over the years of questioning that I have directed to this project it is not that I stand in favour of any particular solution but that I am appalled at the inadequate examination which the tunnel project has received. My entire work has been towards obtaining a better examination of the project than it has so far received from the Department.

Mr. Peyton

The hon. Gentleman will recollect that I immediately corrected myself on that occasion and explained to the House and the hon. Member, with apologies, that I associated him with what he has said—the complaint that alternatives had not been adequately considered, a complaint which I strenuously resist.

Mr. Sheldon

The right hon. Gentleman will recollect that it was only as a result of an intervention that he subsequently made that correction. I am making the point that it has been the view of those in the Department that the further examination of alternatives is not necessary because it is the fount of all knowledge. I always thought that the Department had examined the project but did not wish to go into details which were long since behind it. It was only when I went to the Department and met the people concerned that I found that what I had suspected but hardly dared to believe was actually the situation—that alternatives were never adequately examined by the Government.

When we consider the length of time involved—since 1963—it is reasonable to assume that, however advanced any detailed proposals might have been, an examination over a short period, using a small allocation of manpower, might have been put in train to meet the criticisms that have come from engineers, civil engineers, builders, constructors and all people concerned with this scheme. I have failed in questions and debate to have the matter dealt with. I thought that at any rate I could attend the Committee stage and exercise what is the right of any Member to put questions and receive considerable replies.

What worries me most is not that the Minister is failing to give me the replies because he wishes to be discourteous. I do not think he is that kind of man. It is because I suspect the Department has not investigated the matter properly and therefore does not know.

The Minister said that it is normal to give statements just before the guarantee is given. If it is normal to do that—

Mr. Peyton

What I said was that the hon. Gentleman's own amendment would require the statement to be made immediately before the guarantee was given, and that would be a perfectly senseless performance.

Mr. Sheldon

I thought that the hon. Gentleman said that it was normal that statements would be given before the guarantee. If I took down those words incorrectly, then I apologise to the right hon. Gentleman. He went on to say that, having gained the authority of the House in principle, the details do not need to be debated or discussed. Since we are now dealing with a sum of £30 million for the construction of a Channel Tunnel, it is surely not unreasonable to ask how we are to spend this money, who are the people involved, and what are the terms under which the money will be guaranteed.

Mr. Peyton

The hon Gentleman persists in misquoting me. What I said clearly was that the Government, having come to Parliament and having obtained Parliament's approval in principle and in detail, would not wish to subject the whole project to a series of parliamentary hiccups of the kind which no doubt the hon. Gentleman would be very good at engineering.

Mr. Sheldon

The right hon. Gentleman talks about the detail. I do not see any detail about the level of interest, the terms of repayment, who is to receive the money, and so on. This detail is not in the Bill, so far as I can see. These are matters of great importance. I do not see the moneys being guaranteed as a result of certain successes or as a result of certain other matters which are not quite so successful. I see none of that in the Bill.

If I regarded the Government's record in large-scale projects as excellent, then I might be prepared to give them the benefit of the doubt. We know that when it comes to major projects of this kind, Governments of both complexions have failed to discover the proper method of controlling them. In such a situation what is fair and reasonable is to have some degree of minimum control by at least having a debate lasting one and a half hours at some time in the next year or so. But that is the kind of minimum control which the Minister and his Department are not prepared to give. If I had acquired a greater respect for decisions on these matters in the past few years, I might have been prepared to waive the need for such a close examination. But because I do not have that degree of respect for that judgment, I believe it is important to keep some degree of control.

In later amendments we come to the detail. What the Minister fails to give us is any detail about the private interests. I know that the Minister obviously is not prepared to do a great deal of answering. But this is the only forum in which we shall ever be acquainted with these facts. If Parliament does not get the facts on this occasion, it will never get them until it is too late. We have never heard why the Government believe that it is necessary to introduce private capital into the scheme.

I am not against the introduction of private capital into any scheme so long as those concerned are paying their way and introducing certain skills and understanding. I am then more than delighted. I have no doctrinaire view on that matter. But why are the Government introducing a small measure of 10 per cent. of private capital which will never achieve an independent assessment by private industry of the viability of the scheme? As I have said, it depends entirely upon Government action whether the Channel Tunnel achieves the success claimed for it.

Will the right hon. Gentleman explain, even briefly, what there is in private interest that provides a separate assessment of the likely success of the scheme that is not available to the Government making use of their own sources of information and expertise? This point was put by one of the Minister's hon. Friends and he failed to respond to it. Perhaps he will respond to it now that it has come from the back benches on both sides of the Committee.

Mr. Peyton

Perhaps I may prevail and trespass on the indulgence of the Committee to speak again to answer the last point made by the hon. Member for Ashton-under-Lyne (Mr. Sheldon). I dealt with this matter at some length on Second Reading. When I took over responsibility for this project it was already part of an agreement which had been reached by both the British and French Governments. I do not look for every opportunity and reason to overturn agreements made on behalf of a British Government. Indeed, I look for every reason to honour them.

Mr. Sheldon

The Committee will take note of that reply. I have attacked both the previous and the present Government for precisely this purpose. The only defence that the Minister for Transport Industries can offer for going along with private interests is that this was a decision by a previous Government. For this, at any rate, we are grateful, because it advances the argument considerably. I could not understand how the right hon. Gentleman, for whom I have great respect, even though I am being controversial, came to think that just by giving 10 per cent. to a private interest he could obtain an independent judgment that was not dependent upon the Government. I have put this point to him again and again, but have failed to get a reply. At least we now know the answer. The reason given by the right hon. Gentleman for the 10 per cent. private involvement is not that he believes it to be necessary, not that anybody in the Department possibly believes it to be necessary, but that, being a decision by the previous administration, he has gone along with it.

Mr. Peyton

No. I do not know whether the hon. Gentleman is purposely seeking to misquote or twist what I say. I did not say just because it was a deci- sion by the previous administration. I said that one reason for going along with private participation, not mentioning any figure, was that it had been agreed by a previous British Government with the French Government. On the whole, I think it has been a tradition of this country for Governments not to dishonour the international understandings of their predecessors.

Mr. Sheldon

I am sorry that the right hon. Gentleman should think that I am misquoting him. What strikes me is the obvious consequence of what he said. I did not for a moment think that the right hon. Gentleman had informed the House that he did not agree with the 10 per cent. private interest. I am drawing the obvious conclusion from what he said. The right hon. Gentleman is giving this provision faint praise and saying that it was a decision of the previous Government and he finds himself unwilling to change it. There is a lack of commitment to private interests which speaks for itself.

11.0 p.m.

Mr. Eric Ogden (Liverpool, West Derby)

Could one reason for this involvement of private interests be that this was not a scheme which came from the Government to private interests, but one which, over the years, was taken up by private interests and put to the Government? This started as a private interest. My hon. Friend knows my point of view: we should build the tunnel and then take it into public control. But I should not criticise anyone outside the Government for having an idea, supporting it and getting the money to back it—something which other projects have not had—and then being allowed a share in that Government involvement.

Mr. Sheldon

My hon. Friend knows that the private company which started it before the Government's final decision to take an interest in it was The Submarine Continental Railway Company Limited, which was formed in 1881. It changed its name to The Channel Tunnel Company Limited in 1887, and it formed the basis of the private interest to which my hon. Friend referred. I do not think that the Government should feel themselves bound by all the work that this company did about 80 or 90 years ago.

I do not think that that was the reason. The reason given in the past was that private industry would provide some degree of objective assessment on the likely success of the scheme. What we have heard today shows that that is accepted. It was one of the mistakes that was made in the past, and it is being continued into the future.

I stand by what I said. I see no reason for this private involvement. That is why I tabled the amendment, and what I have heard does not cause me to change my views.

Amendment negatived.

Mr. Sheldon

I beg to move Amendment No. 6, in page 1, line 18, after 'to' insert 'one half of the'.

The Temporary Chairman

I think that it will be convenient if with this we take Amendment No. 7, in page 1, line 20, leave out 'or' and insert 'together with'.

Mr. Sheldon

Thank you, Sir Ronald.

Amendment No. 6 deals with the guarantees given in relation to sums borrowed by the two Governments. The amendment says that the British guarantee should be one half of the sum borowed. According to subsection (2), the sum guaranteed shall not exceed £30 million, or £35 million if the necessary order is put before the House and the extra money is obtained. One would expect the guarantee to amount to one half of that sum, and that is what the amendment seeks to provide.

If private companies were involved, the guarantee would provide that each of the parties would jointly and severally be liable, so that if the party fails to meet his obligations, those obligations would fall upon the remaining guarantor.

Here, however, we are dealing with the French Government, which is hardly in this kind of position. One would have thought that clauses involving this kind of arrangement would not be necessary. I understand, though, that there is a possibility that the Government referred to in line 20 might mean the French Government. This is subject to some ambiguity. Perhaps I may deal with that briefly. The clause refers to sums borrowed in pursuance of any agreement to which the Government or any minister of the Government of the French Republic …". I and others who have seen this interpret the first "Government" as being the British Government and the other "Government" as the French Government. It may be that they both refer to the French Government. If that is so it may be useful, for the sake of clarity, to introduce on report some small amendment which would reduce what has appeared, to one or two people at any rate, to be an ambiguity.

The Under-Secretary of State for the Environment (Mr. Keith Speed)

The hon. Member for Ashton-under-Lyne (Mr. Sheldon) has misunderstood the meaning. For reasons which I shall explain, it would not be appropriate to introduce an amendment on Report. The "Government" referred to is the French Government. It is not a reference to Her Majesty's Government. If it were to have been a reference to Her Majesty's Government, the reference would have been to "the Secretary of State". If the hon. Gentleman reads the third paragraph of the Explanatory and Financial Memorandum he will see that this is made clear.

Clause 1(3) makes it clear that if the guarantees given by the French Government do fall to be called, the payments to be made by the United Kingdom Treasury, by way of contribution, to the liability of the French Government cannot exceed £15 million or half the total ceiling of £30 million. The agreement to share the costs 50:50 is an international one, which will be enshrined in the treaty and, to cover the period before that can be ratified, in an exchange of notes signed at the same time.

The important point, and the reason why we cannot do it on Report, is that we cannot bind a foreign Government in a British Act. It is for that reason that the Bill is drafted as it is. The "Government", legally and in fact here is the French Government. If it had been the British Government, it would have referred to my right hon. and learned Friend the Secretary of State.

I hope that with that explanation—it is also explained in the Explanatory and Financial Memorandum—the hon. Gentleman will consider withdrawing his amendment.

Mr. Ogden

If in Clause 1(1)(b) it is thought necessary by the parliamentary draftsmen to include once the words the Government of the French Republic why did they not say so previously, saying "the French Government" in the first place, thus avoiding any possible misleading conclusions?

Mr. Speed

That is a very good question. I am advised that legally and in every other way, the manner in which it is drafted is correct and that there can be no ambiguity because in these cases it would have had to refer to the Secretary of State.

Mr. Sheldon

My hon. Friend's point has not been taken very fully into account. Clearly, if there is ambiguity to a number of us, there will be ambiguity to anyone who reads the Bill. It has fooled certain Officers of the House, as well. By simply including a couple of words we could reduce that ambiguity. I should have thought that it was one of the functions of a parliamentary draftsman, or of even the Minister on Report, to make that change.

A very important point has been raised. It will obviously be raised in a number of these multi-country deals. It is said that according to our laws or procedures a Government cannot bind a foreign Government by a British Act. Of course, we understand the purpose of treaties. Yet it is strange to see an arrangement under which we are guaranteeing a sum greater than that needed. I should have preferred to see a form of procedure which took account of these facts and perhaps even explained them.

If the Under-Secretary is willing to comment on this I should listen to his comments with interest.

Amendment negatived.

Mr. Sheldon

I beg to move Amendment No. 9, in page 2, line 1, leave out sub-paragraph (ii).

I should like a much fuller explanation here than those given so far. This is merely a probing amendment, but it probes at some important matters which have not had sufficient discussion. It deals with the responsibilities of the Secretary of State if the scheme fails. It deals with the problems of winding up the project. One of the cardinal rules in any business venture is to consider not only how much can be made if it is successful, but how much can be lost if it is unsuccessful.

Here clearly the amount of loss will not be limited necessarily to one half of the £30 million or £35 million because there may be consequential expenses as well. It is necessary to take into account here those people upon whom we depend for avoiding a loss, or if a loss arises of keeping it to a minimum. We must therefore examine the membership of the British sub-group upon whom so much will depend.

What is the Government's estimate about the division of shares between the members of the British sub-group? It will not be necessary for me at any stage to deal with the French sub-group. That is the responsibility of the French Government. First let us deal with Channel Tunnel Investments Ltd. Apart from its very great age—born 1881 and still going strong—what expertise does the company have now? It was responsible for trial borings over 80 years ago and there is a great deal of sympathy for it for being a pioneer in a venture which was not successful. But why is it a member of this private group? What influence do the Government have on the membership of this private group? How did the right hon. Gentleman view the sub-group's setting up? Did he or his predecessors attempt to influence it? Did he say that there should be some companies of this kind and some of that kind? Did he seek to influence the proportion of shares held by the company? Did he seek to ensure that the expertise the company had was that which was required for the operation?

[Mr. Carol Johnson in the Chair]

11.15 p.m.

It seems an odd sub-group. We start with Channel Tunnel Investments Ltd. That is understandable. This is a company which has been ploughing this furrow for many years and which, having done a small amount of work, claimed some special status, although there was no reason why that should have been granted.

Then we come to Rio Tinto-Zinc Corporation Ltd. This is a company concerned with mining and constructional work and is the main construction work. There are no civil engineering consultants in this group but they can be retained by others of these companies.

Then there is a list of five merchant banks—Morgan Grenfell & Co. Ltd.; Robert Fleming & Co. Ltd.; Hill, Samuel & Co. Ltd.; Kleinwort, Benson Ltd.; and S. G. Warburg & Co. Obviously the task of the merchant bankers is to raise money. I cannot see why five merchant banks are required in a sub-group of this kind.

Here I seek to correct the right hon. Gentleman, who complains of misquotations. He misquoted me in relation to Hambros. I fully respect the position of that firm and what I said does not require any alteration.

All these are merchant banks which are required in the British sub-group. Then we have the British Railways Board, whose interest is obvious and necessary. Then, most surprisingly, we have three merchant banks in the United States—Morgan Stanley & Co., First Boston Corporation, and White, Weld and Co. Ltd.

There are 11 members of the British sub-group. Five are British merchant banks and three are American finance houses or merchant banks. Eight of the 11 are in merchant banking or finance. Three companies have expertise other than finance—British Railways, Rio Tinto-Zinc Corporation, and Channel Tunnel Investments Ltd.

I asked people who are responsible for large-scale contracts, though not as large as this, what sort of group they would have. None of them remotely came near an operation such as this. It is necessary to ask why we have got a grouping that is so heavily weighted in favour of merchant banking—and American merchant banking at that. These companies are to be guaranteed. One of the consequences of this is clear. With merchant banks of this size and power, there will be considerable pressure on the Government to produce changes in their schemes and financing, and to give assistance on tolls, roads, rail and other matters of a kind which other types of company would find hard to exert on the Government. This is only speculation. I give no answer.

I have a question which requires a proper answer. Why has the structure of this British sub-group been the way it is? Why is it so peculiar? What are the advantages of a sub-group of this kind? Coupled with that, why has the old Channel Tunnel company got such a privileged position? What has it to offer in the 1970s? Why is there only one engineering concern other than the British Railways Board?

The Minister may recall the leader in the Financial Times about the possibility of other schemes. One of the striking things about the list of concerns in the sub-group is that they do not constitute the kind of body that would conduct a close examination of alternative schemes. It is about as solid, reputable and reliable a body as could be found, not the sort of body that would examine the whole of the cross-Channel link in the way in which it might have been examined if a few more interests representing rather wider bodies and industries were on it.

The Financial Times said on 9th June: Even those who have long regarded a rail tunnel as the better bet look upon the present studies as a matter of ordinary commercial prudence. The studies to which it referred were the alternative studies. I, too, would regard such studies as a matter of ordinary commercial prudence. Anybody embarking on a project costing at least £400 million or £500 million, and very likely much more before the last invoice comes in, would regard it as normal commercial prudence to conduct an examination of alternatives of the kind that the subgroup and the Government Department concerned have not seen fit to examine.

We are now over the hump of the debate. If I can give the Minister some comfort by saying that, perhaps it might lead him to give a fuller answer on some of the points than he has given hitherto.

Mr. Speed

I shall deal mainly with the amendment, which, with great respect to the hon. Member for Ashton-under-Lyne (Mr. Sheldon), the hon. Gentleman did not touch on. It is a well-designed and well-camouflaged amendment that would wreck the Bill, as I am sure the hon. Gentleman is aware, because he is quite sophisticated in these matters.

However, I shall answer briefly one or the two of the questions the hon. Gentleman asked on the background and why particular groups were chosen. That is dealt with in detail in paragraphs 11.1–11.5 of the White Paper. There is no doubt that the British group combines considerable and reputable financial and technical expertise—"responsible" was the word the hon. Gentleman used. With a company of the nature of Rio Tinto-Zinc as the project manager, that technical expertise is of a high order.

Th hon. Gentleman could have saved a number of his questions about the shareholdings if he had had a copy of Agreement No. 1, which lists the shareholdings on page 8. They will be repeated in Agreement No. 2, which will be published after that has been signed. They are: Channel Tunnel Investments Ltd., 25 per cent.; Rio Tinto-Zinc Corporation Ltd., 20 per cent.; Morgan Grenfell and Co. Ltd., Robert Fleming and Co. Ltd., Hill Samuel and Co. Ltd. and Kleinwort Benson Ltd., 10.5 per cent. each; S. G. Warburg and Co. Ltd., 5.5 per cent.; the British Railways Board, 4.74 per cent.; Morgan Stanley and Co. Incorporated, The First Boston Corporation and White, Weld and Co. Ltd., 0.92 per cent. each.

The agreement also lists the individual shareholdings of the French sub-group. That has been on the record for over a year.

It is important that one should know the appropriate interests of the different financial and technical houses and the British Railways Board. The effect of the amendments would be to make it impossible for the Government to fulfil that part of the arrangement relating to abandonment of the project. One of the fundamental parts of the arrangements which I should have thought the House of Commons would insist upon and did insist upon on Second Reading is that any party can get out at any time; and there are four parties—the British and French companies, and the British and French Governments. If that were a unilateral act by the Governments when the companies were prepared to go on, obviously compensation must be payable.

Subsection (2) of Clause 1 provides for just that. Therefore, if the amendment were to be accepted, compensation could not be paid, and we should either have to give up our right of unilateral abandonment—which frankly would be impossible given that there is still a major hybrid Bill to pass before we can complete—or accept that the private interests would not sign Agreement No. 2 and hence the project would be blocked. It may be—I suspect that it probably is—that that is the hon. Gentleman's intention because we know his views about the private interests and the project as a whole.

However, the House having accepted the principle of the Bill, if we were to make it impossible for a party to withdraw at any time we would be placing ourselves in an intolerable situation. I do not think that the hon. Gentleman sought to argue—and I listened carefully to what he said—that the compensation should not be paid if the Government withdrew when the companies did not wish to do so.

The basic arrangements of principle are set out in some detail in Agreement No. 1, and they will be repeated in slightly different form, although the principle is the same, in Agreement No. 2. Therefore, it has been possible for people to query them if they wished. It is a matter of equity. If the companies wished to proceed and the Governments did not, the arrangements which are described in some detail in the White Paper would have to be made.

I must advise the Committee to reject the amendment because if it were passed it would completely wreck the Bill and justice would not be done to the companies if the Governments were to decide to abandon during the next phase.

Mr. Ogden

I wish to make two points.

First, time and again it is said that the alternatives have not been properly considered. It is not my purpose to defend the British companies in the subgroup; they are capable of doing that themselves. However, any company from Britain which supports the project and which wishes to invest large or small amounts of money in it will have considered the alternatives before becoming a member of the sub-group.

Secondly, if my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) is concerned about the expertise which the companies in the sub-group have available, I give the example of a company which I mentioned in the Second Reading debate on 25th October, Robert L. Priestley of Gravesend. As a former coal miner, I know something about tunnelling companies. Robert L. Priestley is an engineering company which brought machinery over from America and redesigned and rebuilt it in order to construct tunnels under the River Mersey. By the time it had finished the last exercise—the little one, not the big one—of stripping and rebuilding American machinery, we were tunnelling twice as fast and at half the cost as we were previously.

If we had had that equipment three years ago, we might have been drilling the Hong Kong tunnel with British machinery. Because of parliamentary procedures, Priestley has had to wait. It has done its planning and carried out the preliminaries. I quote this example of this company under the supervision of Government and Parliament, being able to provide technical efficiency and the best expertise in the world.

11.30 p.m.

Mr. Sheldon

I fully accept my hon. Friend's comments about the quality of certain individual companies in the subgroup. The point that needs to be considered is that I do not believe there was adequate consideration of alternatives. A group of the kind that we are talking about, largely consisting of financial houses, would not regard as its main consideration what could be done in the way of alternative schemes. Its only consideration is, quite naturally, to see what the Government intend to do, and how the Government intend to reward it for acting in the way it is acting. If it thinks that this produces a rate of return commensurate with its interest, it then decides whether to accept it. That is the kind of consideration that would most likely be given.

I thank the Under-Secretary for his courteous reply. I should like to know what he considers has been the influence by the Department on the membership of the sub-group. Secondly, I should like him to respond to my earlier invitation to say why the membership was weighted so heavily with a number of merchant banks and, in particular, why the American merchant banks were brought in. My third question concerned the old Channel Tunnel Company. What particular expertise did it bring to bear?

I hope that the hon. Gentleman will reply to these questions. I seek only to discover the reason for the nature of what is, on the face of it, not the most obvious combination of companies in the British sub-group. It should be a fairly simple matter to explain why the sub-group came to have the characteristic that it possesses.

Mr. Speed

As I have explained, a great deal of these arrangements was spelt out in some detail in the White Paper. They derived from the arrangements made by the previous administration which, as my right hon. Friend has said, we largely accepted in this respect.

The hon. Gentleman will find in paragraph 11.4 on page 28 of the White Paper an explanation of the situation concerning the public invitation to tender: three groups submitted proposals. In the event none of these proposals was acceptable to the Governments as they stood, and the three groups were given new guidelines and invited to supplement their proposals either singly or, if they wished, in combination". Paragraph 11.5 goes on to explain that a new combined group was formed composed largely of members of the original groups.

As I have told the hon. Member, it was both the view of the previous administration, I believe—though I must not put words into their mouth—and is certainly the view of the present administration that the British sub-group involved a reasonable mix of expertise, legal, financial and technical.

Obviously everybody has his own ideas about what is an ideal mix and what companies should or should not be involved, and no doubt the hon. Gentleman has his own ideas about that. With bodies of their repute, incorporating a nationalised industry and a company of the international standing of Rio Tinto-Zinc, I should have thought that the mix of the British sub-group was very good. It has been built up over two administrations. I do not give this as an excuse, but I believe that the views of two administrations will endorse the membership of the British sub-group.

Amendment negatived.

Mr. Sheldon

I beg to move Amendment No. 11, in page 2, line 10, leave out '£30 million' and insert '£5 million'.

The Temporary Chairman

With this amendment it will be convenient to discuss also Amendment No. 13, in page 2, line 12, at end insert— 'Provided that at no time shall such sums bear a ratio greater than that of seven to three to any risk equity capital which has previously been successfully raised for the purpose of undertaking the preliminary work referred to in subsection (1) of this section'.

Mr. Sheldon

We know that the guarantee does not exceed £30 million. The point that I did not understand when I put down the amendment was the one referred to by the Under-Secretary when he pointed out, not the convention, but the actuality that a British Government cannot by Act of Parliament hope to bind a French Government. Even a statement of intent does not normally find its way on to the statute book. It may be that the answer to the amendment is of the same kind, because it deals with a similar factor, but considering the two sides, the French and the British jointly and severally being responsible for each other, I assume that the French legislation has similar characteristics to ours, but it seems to indicate that this joint and several responsibility may meet the point that the hon. Member made in an earlier amendment.

That was my main reason for the amendment. There was, however, a secondary reason—that naturally I would wish the guarantee to be at a lower level, so that greater control could be exercised by the House. The Minister has assumed that I am implacably opposed to the scheme, despite what I say, namely, that my whole point is to ensure a greater scrutiny of the scheme and to see why the Government have moved forward in the way they have.

I would have wished that the Government had found themselves able to re-examine the project in the way that my right hon. Friend urged the re-examination of the Stansted project. If they had done that and found—as a result of that re-examination—that this scheme proved to be the best, I should have had no objection. I merely wanted a proper examination. That is all I have ever said.

It may be that this is the best scheme, but when we have spent £400 million, £500 million or £600 million we owe it to ourselves, to the House and to those responsible to be able to prove to all reasonably fair-minded people that that money is being spent in the best possible way. My amendment therefore seeks—for the secondary reasons—to reduce the amount only in order that we can obtain greater control.

I do not doubt that in this scheme as in others, if things go wrong the Government will be faced with the temptation, not the inevitability, of having to plunge deeper and deeper. There are few in Governments of determinate life who are brave enough to cancel a project. They leave it to their successors to incur the odium. This is a principle that the right hon. Gentleman will probably recognise. It is up to the critics of such schemes to bring to the attention of this Committee that characteristic of all Governments, so that at any rate the House and this Committee can attempt to control some of the profligacies of which all Governments the guilty. My secondary reason concerns parliamentary control, and I should like to have the hon. Gentleman's reply on that aspect.

Mr. John Sutcliffe (Middlesbrough, West)

In the context of my amendment No. 13 I have to refer to Chapter 4, paragraph 4.6 of the White Paper, which refers to the suggestion that sea ferries might compete for a time on the basis of charges reduced in real terms by 45 per cent. rather than the 30 per cent. assumed in the studies. It is important for us to recognise that the sea ferries confidently forecast that they will compete at a level of fares 45 per cent. below the 1973 level, and they say that this competitive response will not be short term. In fact, by 1980 the ferries expect to be in a position to offer a return fare by sea for a car with three passengers of £23.20 at 1973 prices, while according to Annex 7 of the White Paper the comparative tunnel return fare is likely to be about £34. The important question is: how long at this level of charges will the ferries be able to maintain competition?

The White Paper—again in paragraph 4.6—states This could only be a short-term position as the fleets would not be earning enough to cover long-term costs. The ferry operators strongly challenge this assumption. They are confident that a 45 per cent. reduction will leave them with a reasonable return, and that they will be able to compete not just for five years but for 10 years. The tunnel revenues are based on the expectation of capturing four-fifths of the holiday traffic. If that expectation is upset, it is in the early years that tunnel revenues will be hit; and the early years are the crucial years, because in the later years tunnel revenues have to be heavily discounted.

In my view, the financial rate of return on the tunnel project could well fall more dramatically than the Government's assumption of, at worst, 2½ per cent. It is a question of judgment. Who will be right—the commercial ferry operators, or the Government and their advisers? This is a serious conflict of opinion. Both cannot be right. We have to face the possibility that the Government's calculations may be sufficiently wrong to make the tunnel project a highly speculative venture, and for this reason in phase 2 the project ought to be put to the test of the market more rigorously than the Government propose.

We have been told that private interests expect to raise £8 million of the £30 million for which this Bill provides; that, by the end of phase 2, 30 per cent. of the total expenditure to that point should have been met by risk capital. This amendment is not a wrecking amendment; it is a very reasonable one. A ratio of seven to three, as the amendment proposes, is the ratio proposed by the Government. It would be the amount that the Treasury could guarantee at any time during phase 2, and it would be related to the equity capital successfully raised by the sponsoring companies. This would effectively enforce on this project the direct influence of the open capital market. For each £7 of Government guaranteed loans to be raised, the sponsoring companies would first be required to show that they had already raised £3 of true risk equity.

Only in this way will it be possible to demonstrate that the open capital market has any degree of confidence in this project. At the same time, it will protect the taxpayers from the possibility of an escalation of involvement, in the event that private interests cannot be prevailed upon to put up the amount of true risk equity required. This is in contrast to the loose provisions of Channel Tunnel Agreement No. 1, under which the Minister could permit an extension of time beyond nine months, in order for the obligation to raise the 30 per cent risk capital to be met. Alternatively, under the agreement the Minister could reduce the 30 per cent. risk element to 10 per cent. in the light of market conditions.

If the market will not respond in the proportion proposed, it will have given a damaging verdict on the tunnel project. In this event, it is only right that Parliament should decide whether the taxpayer should bear any greater burden than the 70 per cent liability proposed, which is substantial enough by any reckoning.

My amendment accords with Conservative Party philosophy, preferring commercial judgment to bureaucratic judgment and favouring private involvement before public involvement. I hope that my right hon. Friend will not reject it out of hand.

11.45 p.m.

Mr. Peyton

First, may I say to the hon. Member for Ashton-under-Lyne (Mr. Sheldon) how much I welcome the possibility—I cannot think that it is much more—that he is not after all implacably opposed to the scheme?

I come back to the matter which we have discussed on a number of occasions, that it is difficult if not impossible to go on re-examining projects of this kind. In this case, it has taken many years of preparation to get it to the stage that it has now reached. It has also cost a great deal of money. To go back over that ground again, to spend money on similar researches, would be to indulge in that habit which seems to have grown up in this country of longing to pore over projects, to look at them again, and somehow or other to dredge up some excuse by which we might avoid any decision.

The effect of both these amendments is to limit the amount of guaranteed funds which can be raised. In intention, Amendment No. 11 would simply mean that, instead of Parliament approving the finance expected to be needed during phase 2 with a fall-back power to increase it, an order would be needed very shortly to provide the necessary funds to keep the project going. However, in effect, probably it would mean that the French Government would have to guarantee more than their share, though we would share that obligation with them. But I doubt whether either side would find that situation acceptable or tolerable. Moreover, if our payments to the French were also limited, we would not be able to sign the agreement or the treaty.

Even in its intention, I suggest that the amendment is not acceptable. The companies will not sign and put up the money if they have the prospect of Parliament continuing to want another bite at the cherry every month or so, despite the fairly large hybrid Bill that the Government intend to introduce within a matter of weeks.

I come, then, to Amendment No. 13. I shall not risk your displeasure, Mr. Johnson, by taking up the argument of my hon. Friend the Member for Middles-brough, West (Mr. Sutcliffe) about the rival profitability of the ferries, which cannot be said to fall remotely under this amendment. I accept what my hon. Friend says. It is a matter of commercial judgment. It is not a matter of whether it is the judgment of bureaucrats or of commercial people. There are some civil servants who now advise me on the project, but there are many commercial people. My hon. Friend should not forget that. Their reputation is staked in support of the project. He should not suggest that all commercial judgment is on the same side. That is far from the position.

The effect of my hon. Friend's amendment would be to require that at no time should the risk capital paid be less than 30 per cent. of the total expenditure to date. But under Agreement No. 2 the companies would have flexibility to defer the putting up of their risk money so that the situation in which risk capital was less than 30 per cent. could come about.

If the amendment were carried, Agreement No. 2 could not be signed. There is private risk money of various scales in the Channel Tunnel project. Just under 50 per cent. of phase 1 was private risk money and between 10 per cent. and 30 per cent. of phase 2 will be private risk money. There will be a minimum of 10 per cent. overall. It is the companies' intention to put up the £8 million contribution to phase 2 as soon as possible after the phase begins, if only because it is in their interests to do so.

At the time of signing Agreement No. 2 the risk money will be £2.6 million. That is 30 per cent. of the £8.7 million. At the time of signing the agreement, work costing perhaps £7 million, taking phase 1 and the interim period into account, will have been carried out or committed. That implies only a short move into phase 2 before the 30 per cent. ceiling sought by the amendment is passed.

I recognise the point which the hon. Member for Ashton-under-Lyne and my hon. Friend the Member for Middlesbrough, West have in mind, but I could not possibly advise the Committee to accept the amendments as they would have a damaging, if not a wrecking, effect upon the whole project.

Mr. Roger Moate (Faversham)

I am a little puzzled by the debate which we have just had. I have one particular point to put to my right hon. Friend as well as a number of more general points to make in response to certain of my right hon. Friend's opening remarks.

I understand that there is no obligation on the private companies to raise their proportion of the £30 million. I should be grateful if my right hon. Friend will elaborate a little further. If the taxpayer is being called upon specifically to guarantee £30 million or £35 million, there should be an equal obligation on the private companies to raise their proportion at this stage.

I was attracted by the argument put forward by my right hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe) about this being an opportunity to test the merits of the project. I do not think that my right hon. Friend has at any stage gone into the matter at sufficient length to explain why a project which is put forward as being so eminently profitable should require massive Government backing. He may feel that it is a persuasive argument to some that the massive sum should be required as it was put forward by the Opposition when they were in power. That does not appeal to me as a particularly strong argument. My right hon. Friend was damning the case with faint praise when he put forward such a thin argument to justify the way in which the project is being financed.

Mr. Peyton

I was answering the point raised by the amendment and I was confining myself to that point. I was not attempting to deal with the much wider and general points as to whether there should be private finance.

Mr. Moate

Maybe I was straying from the point made by my right hon. Friend. I still stick to my general point that we have not really had a proper examination of the financing of this project. The type of exchange we have had forcibly demonstrates the need for, at the least, a Select Committee, to examine the project. I agree that the amendment offers an opportunity to test the market. It would place an obligation on the private companies to go ahead and raise more risk capital at this stage. That will test whether the projections put forward in the White Paper are right in the eyes of commercial interests.

My hon. Friend the Member for Middlesbrough, West mentioned the question of the fare projected levels. Many would argue that the ferries could operate more competitively and retain a large amount of business. There are other factors, such as the inflation that is built in. The inflation figure built into the cost projections is 5 per cent. That is a remarkably confident figure to predict. I should be interested to know what the likely inflation rate is for the next few years and what effect this will have on the confidence of investors in putting in the money without there being Government guarantees.

These are important questions to which we should have answers. The same uncertainty is raised over the question of interest charges. These have risen considerably since these projections were first made. This is another factor which could send the cost escalating much higher than the figures we have so far had. My right hon. Friend has been a bit scathing about accepting the type of parliamentary control which these amendments suggest. It may be that they are not in exactly the correct form, but I feel that we must have some greater measure of control over this project as it moves forward.

My right hon. Friend used the phrase "hiccups of doubt". He said we cannot have these. But the hiccups of doubt of the executive are the very breath of light to parliamentary control. When this project was first mooted the cost was £160 million. Over seven years it has risen to £850 million and will be more. We would have had to have a few hiccups of doubt if the construction had started seven years ago and we had reached the point where it was five or six times greater than that figure.

I believe my right hon. Friend believes very much in there being proper parliamentary control and scrutiny in these matters and I hope he will offer the Committee some assurance that we will have regular control over them, that we will see these guarantees and perhaps have a chance to comment on them. I am sorry he cannot find some way of accepting these amendments, particularly that which would give us that measure of parliamentary control.

The Government should have come forward with affirmative orders before these guarantees were issued. I also believe that not only must the Committee and House exercise proper scrutiny but that the public should be more greatly involved and that there should be a public inquiry. That is not in the amendment. In the meantime, this amendment has much to commend it. My right hon. Friend ought to give us more detail about future costs. I hope that my hon. Friend will persist with his amendment.

Mr. Kenneth Warren (Hastings)

There is considerable worry over some of the points my hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe) has raised. When I raised this subject three weeks ago and posed some questions to my right hon. Friend about tariff levels and the targets set there was no reassurance in his reply. There was no comment at all on the questions I had posed to him. I feel that the price target set for this venture is far too high.

12 midnight.

There is no "fat" whatever to accommodate the projections of the ferry operators who have already said they can operate substantially below the Channel Tunnel prices that have been postulated. But one can bet one's life that they have a lot more "fat" hidden away to allow them to cut prices when the competition comes. The cross-Channel ferries operate what must be the world's most expensive ferry service and they have never been challenged by any other form of transportation on the scale of the Channel Tunnel. This is very worrying.

If we have a situation in which the Government do not want to accept the wider range of probing that some of us think is necessary, it brings into doubt whether the Government are right to have such a large single component of the total operation falling as costs and charges on their doorstep. The room for manœuvre appears to be far too small. Therefore, although I have some doubts about the amendment, I hope that the Minister will give us more reassurance about the costs which have so far been proposed.

[Mr. E. L. Mallalieu in the Chair]

Mr. Sheldon

I am sorry that the right hon. Gentleman has decided not to reply to some of the points which have been raised, because they reinforce a great deal of the debate that has been taking place among those who are interested in these matters.

The hon. Member for Faversham (Mr. Moate) asked why the private interests were not involved with their own money in the guarantee of £30 million. If they had been involved in that kind of money, we might have seen a greater test of the scheme than we have seen so far. What is quite clear is that they would not be so stupid as to chance their money in this sort of way on this basis.

The hon. Member for Hastings (Mr. Warren) spoke of the position of the Channel ferries. On the question of charging, he was right to say that there is a great deal of "fat" in the profit of the Channel operators. Of course, they can be squeezed considerably. Those profits exist and the question of charges some 45 per cent. lower by the ferries could well be met. As the hon. Gentleman said, the ferry operators and the Channel Tunnel operators cannot both be right; one will be right and the other wrong. But there is a difference in what will happen to them. If the tunnel company is right the ferries lose money, but if the ferry operators are right the tunnel still goes on. One is a capital scheme with large sums of money introduced to make this tunnel. If it is not successful, one does not scrap the tunnel as one will scrap the ferries. One does not take into account the large capital sums that have accrued and one reduces the charges so long as they cover operating costs.

The tunnel is at a lower level of operating profitability because, if the worst comes to the worst, the Government will find themselves having to write off the amount of their capital that has to be written off to make the Channel Tunnel pay. It is this kind of competition the ferries will encounter—not the competition that takes into account the capital cost, the cost of writing down the capital, amortisation, and so on. The eventual competition, if the ferries are competitive enough, will mean a level of competition that may just be above the level of operating costs.

Therefore, if and when the Government make this kind of decision, they will be in difficulty because they will be under some compunction to reduce that loss on the Channel Tunnel, and to reduce that loss they may have to start providing the roads and the rail, changing the operating charges, and so on, in the manner that I described on an earlier amendment.

The hon. Member for Faversham was right about there being great doubt in Parliament and outside on the viability of the scheme. That doubt can be resolved only by a further consideration in some detail.

The Minister said that we cannot go on re-examining these projects. He must realise that he has it wrong. We have not re-examined this project once. We have had only this Channel Tunnel—nothing else. The right hon. Gentleman has not come to the House with anything other than that, and even the information on that project has been remarkably limited.

The First Deputy Chairman

Order. The hon. Gentleman is talking about matters which are outside the scope of the amendment.

Mr. Sheldon

I shall be guided by you, Mr. Mallalieu. I was referring to Amendment No. 13, not No. 11, to which you may have thought I was addressing my remarks. I was referring in Amendment No. 13 to the sums bearing a ratio that includes an element of risk capital. If there is this clement of risk capital then it would be a viable scheme. The viability of the scheme has been referred to by a number of hon. Members and it is to that aspect that I am referring. If the scheme is viable the risk capital can be introduced.

The Minister, strictly in order, said that we cannot go on re-examining these projects. I say that we have not re-examined these projects. There has been what the Financial Times called a lack of commercial prudence in not considering other alternatives. This is the main charge that is laid against the right hon. Gentleman and the Department, and it is a charge that continues.

Amendment negatived.

Mr. Sheldon

I beg to move Amendment No. 14, in page 2, line 16, leave out '£5 million' and insert '£10 million'.

This amendment clearly deals with control. It is not concerned with the other matters involving problems of joint and several responsibilities, so a lower sum is inserted. This proposal deals only with the need for the control of public expenditure. In effect, it asks why the figure is £30 million, what it includes and why it cannot be a lower figure that would allow us a greater degree of control. The £10 million represents in part a paving amendment to new Clause 1.

The argument here concerns the control which we discussed on the last amendment. As these debates proceed my realisation of the need for this kind of scrutiny grows. I had expected that in Committee a great deal of information would be produced in readiness for these rather more detailed debates than any we have achieved so far.

Despite the Minister's courtesy, it is clear that a great deal of the information which I had assumed, and still assume, was available to the Department is either not available or is not to be made available to the House of Commons. That does not reduce the need for greater scrutiny. On the contrary it makes us realise more fully than ever what we are doing tonight. When we come to consider the new clause we can deal with this matter in more detail and perhaps discuss some of the mistakes that were made in the past.

Mr. Speed

I shall not discuss the new clause, because my right hon. Friend will deal with that in due course.

This is not just a question of the resources available to the hon. Gentleman in drafting the amendment being slightly inferior to those of my Department. What the amendment would do may be very different from what the hon. Gentleman intended.

The effect of the amendment would be that the British Government with the French Government could guarantee up to a total of £30 million. However, if the project were abandoned and the guarantee were brought into effect, the British Government could, under subsections (1) and (4), pay out up to £15 million on their own account and a total of £30 million provided they were reimbursed by the French Government for sums paid out beyond £15 million. But if the French Government were called upon to meet our joint obligations, rather than the British Government, we could not reimburse them up to the full 50 per cent. of the total as envisaged under the treaty.

The hon. Gentleman knows, from the discussions that have taken place tonight, let alone on Second Reading, that the project and the obligations are to be shared 50–50 between the two Governments. The effect of the amendment would be unfair, because the 50–50 obligation would not apply. When I read the amendment I wondered whether the hon. Gentleman had some misunderstanding—as he had on an earlier amendment—about the relative positions of the two Governments. This may be a paving amendment, but it seeks to nullify the 50–50 sharing obligation and, therefore, to nullify something which everybody accepts as of great importance in the Bill.

The hon. Gentleman will no doubt argue new Clause 1 on its merits, but I must tell him that I could not advise the Committee to accept this amendment since it would completely destroy the 50–50 obligation which is so essential.

Amendment negatived.

Question proposed, That the clause stand part of the Bill.

Mr. Sheldon

There are a number of matters which require at least a brief examination. The Bill seeks to provide a guarantee for an arrangement made between two countries. Because there are likely to be a number of Bills of this kind in future as more arrangements such as this are entered into, there are a number of general observations which might reasonably be made.

I shall restrict myself to one observation about the passage of Bills in both Houses of Parliament. I have no knowledge of French legal matters. My knowledge of British legal matters is limited enough. We can, however, agree that the relationship between the two must be close and identifiable. What strikes me is the thought that no one in the House has the faintest idea of the nature of the French legal guarantees.

12.15 a.m.

That is a considerable omission. We are tying ourselves down very closely but we have no knowledge as to the degree of commitment, in the precise terms that are given by a Bill, that the French Government have entertained. The Government may reasonably say "This is none of our business. Our business is to ensure that we have the legislation that we require. As against our opposite numbers, the French, treaty obligations are sufficient for that particular purpose."

That might be taking too narrow a view of the kind of relationship that will be fostered, either through the extension of the Community or because of the greater number of such measures that might place us in a position in which we shall need to know something more about the details of the French provisions than we know now. I should be grateful if the Minister would mention something about that.

The other general observation that I wish to make concerns major projects. The Minister condemns those who carp at major projects. But we know two things about major projects. First, we do not seem to get them right, which is a fairly damning indictment of our method of operation. Secondly, they last well beyond the lifetime of one Parliament. It is not enough for a Minister in such a situation to say that these are matters that he inherited from a previous Government. When dealing with 10-year and 15-year projects the difficulty is that we have only a five-year Parliament. Faced with five-year Parliaments, responsibility can be less acute than most hon. Members would wish.

When talking about long-term projects and large-scale projects, it is not enough to brush aside criticism, as the Minister seemed to be doing, to have one's head down and to talk about getting on with the job. The real question is how the House of Commons is to maintain some degree of control over projects which, once started, cannot be altered but which will be carried on whatever Government are in office. The only way in which this can be done is by means of bipartisan policies.

I am not in favour of bipartisan policies generally. However, projects such as Concorde, Maplin and the Channel Tunnel essentially need to be based on bipartisan policies. When we have commitments which stretch so far into the future that we know, with the degree of certainty that these things permit, that Governments of both political complexions will be involving themselves in decisions crucial to the operation of the particular project, it seems that the simplest precaution that we should take is to ensure that there is some broad measure of agreement between both sides. That is not what happened on this occasion.

Britain is guaranteeing these sums of money, and with one side committed to a guarantee that will have implications right into the next decade it would seem that certain concessions should be made. The concession required by the Opposition is the simple one of investigation. I should not have considered this too great a price to pay for the kind of bipartisan policy that would have given the go-ahead to some form of Channel link even though ultimately it might not have been precisely the scheme that the Government had in mind.

The Minister has seen an increasing division between the two sides. It should have been his responsibility to try to bridge that gap.

The First Deputy Chairman

The hon. Member seems to have forgotten that the Bill has been read a Second time.

Mr. Sheldon

The only point I make is about the guarantees, Mr. Mallalieu. The guarantees, which are an essential part of the clause—the very kernel of it—are matters upon which the Opposition and the Government disagree. That disagreement, I maintain, could have been avoided if the Minister had approached the subject in a different manner. It is with great regret that I say that in this matter there has been division which could readily have been overcome.

My next point concerns the repayment of private interest. I understand that when the right hon. Gentleman spoke before about the payment of interest he said that the Government were adopting the normal way of doing such things. Since then he has heard the hon. Members for Faversham (Mr. Moate) and Middlesbrough, West (Mr. Sutcliffe) suggest that there should have been a great private commitment with risk capital coming in even at this stage in the programme. If that is so, it reinforces my argument that at any rate interest need not have been paid. I do not think it would have been possible to obtain private risk capital at this early stage. But if an argument can be made for it now, it is possible to argue at least as forcibly that interest payments are not necessary.

I should dearly have liked to welcome the clause as dealing with the widest aspect of the Channel Tunnel link. It is restricted and I must oppose it for that reason.

Mr. Peyton

I shall deal first with the last point made by the hon. Member for Ashton-under-Lyne (Mr. Sheldon). The work we are here concerned with is estimated to cost about £30 million, of which it is expected that the Governments will guarantee about £22 million, the remaining £8 million being raised by the companies as risk capital. In addition it will be necessary, as I have explained, during phase 2 to refinance £2.8 million of the guaranteed funds out of a total of £5.4 million for phase 1.

The clause provides the British Government with the statutory authority necessary to enable them to meet the financial commitments undertaken by them in conjunction with the French Government in phase 2. Even at the risk of straying slightly from this narrow issue, I think I should answer some of the points that the hon. Gentleman raised.

It is not possible for me to intervene in detail on the form of French law. I am content—indeed, I would have to be content in any event—with the obligation which the French Government and ourselves will undertake in the treaty. I should be surprised to receive inquiries from my French opposite number about the form of legislation we were undertaking in the United Kingdom Parliament, with the French expressing doubts about whether it was adequate to enable us to perform our treaty obligations.

The hon. Gentleman went on to deal with the major projects as a whole and issued the rather blanket condemnation that we do not seem to get them right. He pointed out, which is a little more germane, that major projects last well beyond the lifetime of one Parliament. He accused me of brushing criticism aside and stated that continuity was obviously a problem for everybody when there was the limitation of five-year Parliaments.

I accept all this, but it is a little harsh to blame the present Government for lack of continuity when what they have done is to pick up precisely, though the hon. Gentleman was blaming me for this earlier, the plans which were left by our predecessors. That is not always a very sensible course of action, I admit, and I should by no means wish to do it without very careful thought. However, I am not unduly dogmatic and I think that the previous administration laid down plans which were tolerably sensible and which we could well adopt.

To blame the present administration for lack of continuity and for failing to get the agreement of the Opposition, when what the present administration have done has been to pick up the very plans which the Opposition made when they were in government, is to fly in the face of common sense, facts and everything else.

I shall not go into questions of our policy for joining Europe, trade unions or anything like that. One is accustomed to a fair measure of tergiversation on the part of the Opposition, but never have I found the lack of recognition of it so clearly evinced as by the hon. Gentleman tonight.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

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