§ 8.45 p.m.
§ House again in Committee on Clause 1.
§ [Amendment No. 3 not moved.]
Lord Tordoff moved Amendment No. 4:
Page 1, line 8, leave out from ("appoint") to end of line 20 on page 2 and insert ("an officer to be known as the Director of Railway Regulation and Franchising for the purpose of carrying out the functions assigned or transferred to the Regulator or (as the case may be be) the Franchising Director, by or under this Act.
(2) An appointment of a person to hold office as the Director of Railway Regulation and Franchising shall be for a term not exceeding five years; but previous appointment to this office shall not affect eligibility for re-appointment.
(3) The Secretary of State may remove any person from office as the Director of Railway Regulation and Franchising on the ground of incapacity or misbehaviour.
(4) Subject to subsections (2) and (3) above, a person appointed as the Director of Railway Regulation and Franchising shall hold and vacate office as such in accordance with the terms of his appointment.
(5) When discharging the functions of the Franchising Director, the Director of Railway Regulation and Franchising shall act as a corporation sole by the name of "The Director of Railway Regulation and Franchising".
(6) The provisions of Schedule Ito this Act shall have effect with respect to the Director of Railway Regulation and Franchising.").
§ The noble Lord said: As my name is attached to the amendment, I move it on behalf of the noble Lord, Lord Ewing, and myself. It is a probing amendment designed to make more understandable the necessity to separate the functions of the regulation of railway services and the procurement of railway services in the public interest through franchising. The franchising director is to be given powers of regulation of fares on non-franchise services, if assurances given in the House of Commons are followed through. This suggests that there is a considerable overlap between the roles and a lack of clarity in the Government's intentions for each of the new offices. It seems to us that combining the offices would reduce bureaucracy and simplify the new structure.
§ What is clear is that there is consensus that a triad —perhaps the Minister will disagree with this—or even a trinity is overkill. Looking at the emerging picture, it is increasingly clear that the Government are blurring the distinction between the regulator's role, which includes the protection of the public interest, and the franchising director's role, which must also include the public interest in the way in which he specifies services. Charging—that is to say, fares—is normally looked upon as a regulatory matter: yet here it is to be with the franchising director. So although in the purest sense one could say that licensing and regulation are logically separate from procurement of services, in a complex industry like the railways the overlap becomes quite considerable. What the Government apparently 1014 propose in respect of fares exemplifies this. Therefore the amendment suggests that one new officer can discharge both functions, simplifying the tiers of bureaucracy with which operators and the public have to deal. The Government need to produce some rather better arguments than they have so far to justify the separation.
§ In addition to simplification, there is need for more development and not mere regulation in the Bill. The proposals put forward by the Liberal Democrats 18 months ago suggested that there should be a rail enterprise and development office. We fear that the way the legislation is going will preserve the bureaucratic aspect of the 19th century concept of railways. I am sure, based on what he has said today, that that is not what the Minister intends. But new technology and the great advances made in road and air transport—and freight in particular—should not lead to the demise of rail freight but its parallel development. So the figure at the top should not be a regulator but one who is responsive to enterprise and to development. I beg to move.
§ Lord Carmichael of Kelvingrove
I am grateful to the noble Lord, Lord Tordoff, for moving this amendment. He is a signatory to it and it is a probing amendment. We wish to find out what is the Government's view on it. The Bill rests on a triad of rail masters who control a large supporting cast. It is a unique venture separating the trains from the tracks on which they run and requiring that both the providers of the infrastructure and the operators of the train services to operate commercially. Nowhere else in the world, nor in the entire history of the railways of this country, have these things been done.
The first member of the triad operates anonymously. The name of Railtrack, while nowhere on the face of the Bill although the first new body to be described in A guide to the Government's Proposals, which was issued to your Lordships' House before Second Reading, will provide the infrastructure, track, signals and stations.
On the Railtrack network the Government hope that soon they will be running the trains of a myriad of railway operating companies. Most of them will hold franchises, with British Rail itself operating companies. Most may be completely commercial open access passenger services. But all freight will be on the open access basis.
The second person in the triad is the regulator—a Godfather-like creature. He is to grant licences, guard access rights and seek to promote and protect the users' interests. He will also develop the railway services. Regulators in other privatisations, notably of gas, electricity and telephones, have looked after the availability of services and the prices charged to customers.
The third member of the triad is the franchising director. He is the human face. As someone put it, he is the Mr. Nice Guy, the smoothie, the purchaser, the specifier of passenger railway services needed for the public good; the facilitator of some of the regulator's aims of promoting and developing rail services. He 1015 will secure the compliance of the minor players to the standards required for the carriage of passengers and he will exact penalties when they fail.
A most significant additional duty emerged for the franchising director at Report stage in another place. The Minister will he aware that Mr. Roger Freeman, who was the Minister in charge of the Bill, said:First, a duty should be imposed on the franchise director in respect of fares … clause 5 is probably the most appropriate for that to be introduced".Clause 5 deals with the duties of the franchising director, a topic which we believe is something which can be looked at with pleasure. Mr. Freeman went on to elaborate three other matters:Secondly, … a duty in relation to fares exercised through the franchising agreement … some services will run outwith the franchising arrangements … existing railway services throughout Great Britain will be subject to franchises. Therefore, the agreements into which the franchising director will enter will cover all services".—[Official Report, Commons, 25/5/93; col. 814.]Looking at the emerging picture, it is increasingly clear that the Government are blurring the distinction between the regulator's role, which includes protection of the public interest, and the franchising director's, which must also include the public interest in the way he specifies services. Charging fares is normally looked on as a regulatory matter, yet here it is to he with the franchising director. As set out in the Bill originally, that is not his job.
Although in a purist sense one could say that the licensing and regulation are totally separate from the procurement of services, in a complex industry like the railways the overlap becomes considerable. What the Government apparently propose in respect of fares shows that very clearly. Therefore, the amendment suggests that one new officer can discharge both functions, simplifying the tiers of bureaucracy with which operators and the public will have to deal. I believe that the Government need to produce good arguments to justify continued separation as proposed in the Bill. Therefore, I fully approve and support the amendment moved by the noble Lord, Lord Tordoff.
The Earl of Caithness
I am delighted to share the enthusiasm to cut down bureaucracy and streamline the new system, as put forward by the noble Lords, Lord Tordoff and Lord Carmichael of Kelvingrove. It will not come as any surprise to them that we thought very long and hard about the number and nature of new offices to be established under our privatisation proposals. Our aim has been to minimise the bureaucracy involved while grouping responsibilities in a way which makes good, practical sense. We concluded that the offices of the franchising director and the regulator should be separate because the functions of each office are different.
The regulator is to have oversight of the railway industry as a whole. He will be concerned with use of the network by train operators as well as the use of train services by passengers. He is to be responsible for licensing operators, for overseeing access agreements, for promoting competition, and for promoting the use of the railway network. His interests will cover freight as well as passenger services.
The franchising director will be concerned with the franchising of passenger railway services. He will have 1016 a budget for paying subsidy provided by the Secretary of State, and, using that budget, he will be responsible for securing the provision of socially necessary passenger railway services throughout the country, working jointly with the PTAs and PTEs in their areas.
The franchising director will naturally have an interest in seeing that access to the track is made available as cheaply as possible to the franchisees. His natural inclination would be to see trainpaths awarded to franchisees above all others—freight operators or new open access operators. The regulator, on the other hand, while recognising the importance of franchised passenger services, will be concerned with the interests of all rail users and in seeing that these are efficiently catered for across the board.
While we have accepted that some moderation of competition will be necessary to get franchising under way, our aim ultimately is to create a competitive market for railway services, with operators competing for custom and bidding for trainpaths. Only through this process will the railway be turned around so that the focus is on providing the services rail customer; really want. That is why it is important for the regulator to be independent of both the franchising director and of the Secretary of State.
If the posts were merged, non-franchise operators and indeed Railtrack would always have the suspicion that the director of railway regulation and franchising would favour his own franchised services over others' interests. I hope that the Committee will agree that that cannot be right.
There will be a long-term role both for the regulator and for the franchising director. As competition develops and as more operators come on to the network, his role in overseeing the terms of access will become more important. But even in the long term we accept that some socially necessary passenger services are likely to continue to require subsidy. Those services will be procured by the franchising director.
I hope that I have made it absolutely clear why, after a great deal of consideration and having looked at the argument for combining both posts, we feel that it is better to separate them.
§ 9 p.m.
§ Lord Tordoff
I am grateful to the Minister for that interesting reply. I actually heard the word "promote" once or twice, which gives me some encouragement in relation to what I was saying about the development of the service. As the noble Lord, Lord Carmichael, and I have both said, this is a probing amendment and we shall clearly need to look at the reply. I begin to understand that there may be points at which the separation of services is of some benefit to the railway system as a whole, so perhaps I may leave it there for the moment. When we have read the Minister's reply and thought about it, we may come back on this point at a later stage. For the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause I agreed to.
[Amendments Nos. 5 and 6 not moved.]
1017 Schedule 1 agreed to.
Clause 2 [Rail users' consultative committees]:
Lord Carmichael of Kelvingrove moved Amendment No. 7:
Page 2, line 29, leave out ("Rail") and insert ("Transport").
§ The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendment No. 8. A fair amount of the subject matter of these amendments was discussed in relation to earlier amendments which many of us believed were so substantive as to lead almost to Second Reading-type speeches. I am pleased to be associated in this amendment with the noble Lord, Lord Teviot, who will perhaps speak more fully than myself about it.
§ As currently drafted, the Bill proposes to abolish the existing CTCCs and TUCCs and replace them with committees, the titles of which confine them to matters relating only to rail travel. As the amendment clearly shows, we feel that that is too narrow and that the committees should be able to consider much wider transport matters. Wider functions in respect of the ferries, the Underground, and light rail and bus services are actually written back into the Bill at a later stage although at this early stage they appear to have been removed. We are concerned about the position of a number of transport users' consultative committees for the north east and the north west of England and for the Manchester Metrolink, as well as about the Scottish users' consultative committee. They deal with much wider forms of travel than purely the railway system. It would be an absolute tragedy if they should be lost in areas where there is a very good combination of rail, road, Underground and bus transport. In Scotland, there is also an important network of steamers on the Clyde and the sleeper trains which meet them.
§ The noble Baroness, Lady Stedman, has tabled important amendments to Clauses 68 and 69 to extend the remit of the committees to allow for open access to rail services also. We hope that those amendments will attract wide support.
§ It is interesting that the amendments proposed by the noble Lord, Lord Teviot, extend the powers of the TUCCs explicitly to bus users, with the primary roles of traffic commissioners and local authorities being, I believe, ingeniously preserved and built upon by his amendments. I hope that the noble Lord's amendments, to which he will speak much more fully than I have, will receive the deep consideration and support of the Committee.
§ Lord Teviot
It is a great pleasure to join the noble Lord, Lord Carmichael of Kelvingrove, in these amendments. I am sure that he will remember the many amendments that we shared in 1985. The noble Lord has considerably thrown me because I had thought that I was to move Amendment No. 7. I hope, however, that I am a sufficiently skilled parliamentarian—I rather doubt it—to condense my prepared speech and to leave out the points which the noble Lord mentioned. The first point on which I must take issue with the noble Lord is that I do not think that these matters have been discussed earlier.
1018 The first pair of amendments, to Clauses 2 and 3, reverse a change in title that the Bill proposes. Currently, we have a central transport consultative committee, the regional transport users' consultative committees and the London regional passengers' committee. I believe that passengers by all forms of land public transport in the UK need representation. The CTCC, TUCCs and LRPC have discharged the function admirably for railway users. The noble Lord, Lord Carmichael, mentioned Caledonian MacBrayne's ferry services in Scotland.
As the noble Lord mentioned many others also, I shall not do so, but shall move on to my next point and to the substance of the amendment. As the problems of congestion and environmental pollution increase, it will be increasingly important that we look at all forms of passenger transport together. Members of the Committee know that I take a close interest in the bus industry and in the excellent work that is carried out by the magnificent seven passenger transport authorities and executives in the main conurbations outside London. I believe that the Government wish the sort of entrepreneurial skills that have been shown by the managers of the newly independent bus companies to be applied to railway passenger services. Indeed, they hope that some of the bus companies will bid for franchises.
I am presuming that your Lordships are aware of the Reverend W. Awdry's railway stories, so I ask the Committee to consider the situation if Bertie's bus service successfully takes on Thomas's branch line. What better solution than Bertie and his colleagues delivering and collecting passengers to the stations along the route? But what if something goes wrong on the journey? If it is on the branch line it is easy. One contacts the users consultative committee which will weigh the complaint and take the necessary action. But if it is on the bus, there is no focus. The traffic commissioner may or may not be interested. The local authority may have an interest if it pays a subsidy. Surely that cannot be right. Passengers using Bertie's bus services to link with Thomas's branch line regard themselves as making one journey with several parts. One body should therefore represent their interests.
A more logical arrangement than that proposed by the Bill would be to retain the consultative committees as full transport consultative committees—in fact, as passenger consultative committees. They would perhaps discharge a wider function more effectively if responsible directly to the Secretary of State rather than to the regulator. At present, the CTCC and TUCCs report to the President of the Board of Trade. Clearly, they must work also with the traffic commissioner and local authorities. That is why in extending their functions to buses I have included those bodies in the proposed amendments to Clauses 68 and 69.
This is something upon which I hope the Government will wish to reflect. They may say that the market will ensure that the passenger is satisfied about open access rail services or commercial bus services, but many passengers may use fully commercial, subsidised or franchised services in the course of a single journey. The Government promote charters for 1019 consumers and encourage companies to gain quality accreditation under BS 5750. The setting up of transport consultative committees in the way that I propose gives passengers a watchdog that can act as a ginger group without in any way fettering the activities of any other bodies involved. Of course, many of the private bus companies have adopted the Bus and Coach Council's code of practice for dealing with complaints. Such procedures are adequate in the vast majority of cases. We hope that private railway operators will be similarly enlightened, but if problems cannot be resolved locally the wisdom and impartiality of bodies such as the CTCC and the TUCCs is invaluable.
The amendments are not, I am afraid, technically perfect. They are designed to allow the Committee to consider in more depth questions of consumer representation and, in particular, the need to place railways in the context of inland passenger transport as a whole. I hope that the Government will be persuaded to go more widely than the Bill does at present, so we may come back at a later stage with more comprehensive amendments.
§ Viscount Goschen
Amendments Nos. 7 and 8 seek to retain the old names of transport users' consultative committees and central transport users' consultative committee for the new consumer committees. I cannot recommend them to the Committee for several reasons. The new committees will differ from the old ones in certain aspects in terms of their constitutional and administrative arrangements. We have already expanded their role, and we intend to introduce amendments that will allow them to investigate all aspects of passenger services provided by franchisees, British Rail or on behalf of the franchising director. That will mean that for the first time the committees will be able to comment freely on all aspects of fares, levels of service, closures, franchises and any other matters concerning passengers.
I trust that the Committee will agree that to abolish the old committees and replace them with identically named ones would seem more than a little odd. The new names, which have the support of the committees themselves, will also better reflect their role. That is because, apart from some ferry services in Scotland, they will have no remit other than rail services.
I turn now to Amendments Nos. 115 and 119. Those amendments seek to require the central rail users' consultative committee and the rail users' consultative committees to investigate matters relating to bus services. They are therefore outside the scope of this Bill. Even if that were not the case, de-regulated buses are open to market forces and we therefore see no requirement for a statutory users' committee. I therefore urge the noble Lord, Lord Carmichael, to withdraw the amendment.
§ Lord Teviot
Before the noble Lord replies, I must tell my noble friend that I am wholly dissatisfied with that reply. I made various points, and I hoped to be given more information. It might be better to bring the amendments back on Report when matters are clearer and amendments can be more tightly drawn.
§ Lord Carmichael of Kelvingrove
I could not agree more with the noble Lord, Lord Teviot. Amendment No. 7 suggests that the committees should not be involved with rail only. I am grateful to the Minister for the further explanation that they will be involved with fares, services and franchises. That is an advance for which we are grateful.
But, transport, particularly in urban areas, is not just a matter of rail services. When one is dumped at Victoria or Euston Station, one wants to continue one's journey. We want the TUCCs to concern themselves with connecting services. Perhaps Euston and Victoria Stations are bad examples to use in this context. However, if one travels to Gourock, one wants to take a ferry across to Rothesay or Dunoon. The noble Lord, Lord Teviot, and I see the role of the TUCCs as not just being concerned with the railways but with the whole integrated transport system. That was what we obtained from good TUCCs. I agree with the noble Lord, Lord Teviot, that—
§ 9.15 p.m.
§ Viscount Goschen
I was trying to stress that the word "rail" would better reflect the role of these bodies as we are principally talking about rail services. When I referred to "rail" I inferred that rail would cover the other services we are talking about which are rail based, for example the Underground. The London Regional Passengers Committee is an example of this point. The main thrust of our discussion concerns rail services. Therefore we feel that the term "rail" would better reflect the function of the committees we are discussing than the term "transport".
§ Lord Carmichael of Kelvingrove
I understand what the noble Viscount has said. Obviously we are not discussing bus services that do not run to railheads, for example. Therefore I do not follow the logic of the noble Viscount's argument. Like the noble Lord, Lord Teviot, I too feel that "transport" is a better term in this context. As I have said, I am grateful to the noble Viscount for explaining the fares, services arid franchises. He has gone a little further than we expected on that. If the noble Lord, Lord Teviot, is agreeable to my suggestion, I am only too happy to take this matter away and examine it carefully. Perhaps we may have an off the record discussion with the Minister on the meaning of this provision. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 2 shall stand part of the Bill?
§ Lord Clinton-Davis
I wish briefly to make a couple of observations. Clause 2(6) deals with the formation of the consultative committees. It will be the duty of the Secretary of State to appoint the chairmen after consultation with the regulator. What sort of criteria will the Secretary of State, together with the regulator, consider for the appointment of these chairmen? Are they to have specifically local knowledge and experience? I hope they will not be automatically supporters of the Conservative Party as happens with 1021 so many quangos these days. I hope I can rely upon the Secretary of State not to apply those kinds of criteria.
What then happens is that the regulator appoints between 10 and 20 other members but he has to consult with the Secretary of State and the chairman. What kind of experience will these people have? What kind of criteria does the Minister expect that the regulator will apply? I commend the Government on Schedule 2 which is associated with Clause 2. I particularly commend the Government for paragraph 9 of that schedule which has amended the Chronically Sick and Disabled Persons Act by ensuring that when appointing members of the committee regard should be given to the desirability of appointing people who are disabled or who have experience of work among the disabled, or who have knowledge of the special needs of the disabled.
That is a significant advance. I have not often been in the business of applauding the Government, but I do so on this occasion. I have made a probing request and I have applauded the Minister, who was not present while I was busy doing so. I hope that what I have said in the latter respect will be regarded by the Government as helpful.
§ Viscount Goschen
I should say to the noble Lord, Lord Clinton-Davis, that there is no statutory requirement as regards the appointment of the chairman. I thank the noble Lord for his kind remarks about paragraph 9 of Schedule 2 which amends Section 14(1) of the Chronically Sick and Disabled Persons Act.
§ Lord Clinton-Davis
I do not understand that reply. In the Notes on Clauses there is specific reference to the provision that the Secretary of State will appoint the chairman of each consultative committee. On what basis will that be done? The noble Viscount says that there is no statutory duty. Is there no obligation on the Secretary of State? If there is no obligation, what will happen? I do not understand what the Minister is saying.
§ Lord Clinton-Davis
Yes, but I do not understand why the noble Viscount says that there is no statutory duty. Of course there is a statutory duty.
§ Viscount Goschen
There are no statutory requirements as regards deciding who shall be the chairmen of the committees. The Secretary of State will take into account a wide range of factors, including the prospective chairman's knowledge of rail services.
§ Viscount Goschen
Indeed, I made a politically incorrect remark. I should have said that the Secretary of State will choose the best person for the job.
Clause 2 agreed to.
Schedule 2 agreed to.
1022 Clause 3 [The Central Rail Users' Consultative Committee]:
[Amendment No. 8 not moved.]
Clause 3 agreed to.
Schedule 3 agreed to.
Clause 4 [General duties of the Secretary of State and the Regulator]:
Lord Wade of Chorlton moved Amendment No. 9:
Page 4, line 4, at end insert ("and having regard to the economic needs of rural areas").
§ The noble Lord said: This amendment stands in my name and that of my noble friend Lord Stanley of Alderley, who sends his apologies to the Committee for his absence but he supports all that I shall say on the amendment.
§ Clause 4 seeks to establish the general duties of the Secretary of State and the regulator. We thought it appropriate to add to that clause a responsibility of the Secretary of State and the regulator to be aware of the importance of the rural economy. I know that that issue was raised earlier, in particular by the noble Lord, Lord Ewing, but that addressed rural areas more generally. This amendment draws attention specifically to the economic needs of rural areas.
§ During recent years there has been a large upsurge in economic activity in rural areas, particularly as the agricultural industry has lost its importance in creating wealth in those areas. There has been a large movement of businesses and investments into rural areas. Therefore, the rail service is an extremely important part of providing services and products to those industries and, indeed, taking away the products. The whole concept of development in rural areas has been extremely important for people who have moved out of agricultural industries. It is particularly important in the more remote areas; for example, in Wales, Cumbria, on the East side of the country and in the South West.
§ The amendment seeks to ensure that the facilities and resources which are at present used to maintain those rail services in rural areas will be maintained. As I understand it, out of the total grant which British Rail takes from the Government, some £400 million per year goes towards maintaining those rural services. In addition, something in the order of £7 million comes from local authorities. I seek to ensure that those resources continue to be available and that the Government understand the importance of maintaining the economic viability of those areas. There is considerable anxiety in rural communities that the Bill may make the continuation of those services difficult if the Government do not ensure that that money continues to be available.
§ We wish to see the franchises operated in the rural areas, but, in order to do so, they will clearly need Government support. I should be most grateful if my noble friend would explain how that system will work, how he sees the franchisee being able to derive benefit from the grant that is now available to British Rail and whether he feels confident that the services that are now available to rural areas will continue under the new system.
§ I should like to ask my noble friend another question relating to this matter. I intend to withdraw 1023 Amendment No. 21 which raises a slightly different issue. Without going into that, perhaps I may draw attention to the fact that the electricity, telecommunications and water legislation made provision to ensure that charges in rural areas were not increased as a result of the extra costs involved in those areas. The Acts stipulated that there had to be an equalisation of charges. Rural communities are anxious that, under the Bill, the franchisee might well increase the rail charges both for freight and passengers in the more inaccessible areas. Clearly, it is important that the rates are not excessive and do not make it uneconomic to carry out businesses in those rural areas. I should be most grateful if my noble friend would deal with those matters. I beg to move.
§ Lord Clinton-Davis
I should like to support the amendment proposed by the noble Lord, Lord Wade. He is right to point out the importance of maintaining the rural economy, but it cannot be separated from the difficulties that will inevitably be faced by rural services. They face critical situations and there is always a shadow overhanging them. That point has been borne out by history over the past 30 years or so. The special problems that arise in relation to the Government's plans are that if the franchise director finds that he is running out of money —it is not impossible that that should be the case—he might find that he is not able to provide for rural lines which are the biggest loss-making area and which might therefore receive the lowest priority. He will have to work to a fixed budget and there will be strains on that budget. Consequently, there will be pressure to maintain rural services which may not be possible.
I do think that the costs of running rural services are likely to rise under the Government's proposals. Revenue could well be reduced. Extra subsidies are unlikely to be available to allow for that, at least on the scale that is required. The Government's plans in relation to the railways are to halve total rail spending over the next three years and there will therefore be less public money available for subsidy or investment. So, even if I were wrong about the last proposition, there can be little doubt that rural services are likely to come under threat.
The position is rendered even more difficult by the fact that there will be incentives to end the provision of cross-franchise services. Regional railway cross-country services have been something of a success in recent years. They have been considerably expanded and upgraded with new trains, but the trouble is that they fit rather badly into the different franchise areas and the danger is that administrative tidiness could well take precedence over passengers' needs. I understand that there is some talk of curtailing the East Anglia north-west services at Peterborough rather than Norwich in order to aid the franchising process.
I want to see the same objectives fulfilled as those outlined by the noble Lord, Lord Wade. You cannot glibly talk away the problems that arise because there is no doubt that rural services, sometimes representing those with the highest costs and lowest revenues, are 1024 likely to be particularly vulnerable. Therefore, the noble Lord's request is particularly apposite. I shall listen with interest to the Minister's response.
§ 9.30 p.m.
§ Lord Redesdale
On these Benches we support the noble Lord, Lord Wade, as regards the amendment. It seems that rural economies can suffer greatly due to market forces. In times of recession, there will be less use of the railway services. Moreover, if those services are under the pressure of market forces, they are vulnerable to closure. We would like the Minister to give some assurance that such services will be safeguarded.
§ Lord Marlesford
I support my noble friend Lord Wade in his amendment. I should like briefly to make two or three points. First, we are now in are new era compared to the days of Beeching; indeed, it is a time when people are moving into the countryside rather than out of it. Therefore, the idea that it should be necessary to close rural services is not sustainable.
Secondly, I am afraid that there is a temptation for British Rail under its present management to run down rural services, often by subterfuge or by pure bad management. I already gave the example this afternoon of the way in which the names of stations served by British Rail services are being omitted from the timetable, allegedly in the name of saving cost. Thirdly, in the case of unmanned stations—and it is quite right that they should not be manned—it is high time that British Rail introduced a proper communication service so that passengers who use those railway stations know when a train is either delayed or cancelled. At present, they are often unaware of the situation. That is an astonishing fact, but, nevertheless, it is true.
I should like to say a word about the public service subsidy. My noble friend Lord Wade suggested that of the £1 billion plus which goes to British Rail some £400 million goes to rural services. It is most important that we should know exactly which services receive the money. Further, the Government have a real role in allocating that money. It is not fair to leave it all to local authorities. The Government have a ready-made body which, I suggest, could be used to advise them on the needs in rural areas. I refer to the Rural Development Commission. If the commission was asked to have as part of its mandate the provision of advice on where the rural services are needed, where they are under threat and the extent of services, I believe that that would be extremely valuable.
Finally, with the privatisation of rural services—I like to think of it as privatisation; I have some difficulty with the franchise concept—far from being less efficient and less easy to provide such services, I believe that there would be much more initiative involved in providing them. Of course. people would have to be paid where it is wholly uneconomic as, indeed, they are at present. That situation would not change. However, I believe that we could have much enhanced rural services which would actually supplement the growing interest that there is for people to live in and visit the countryside. In cost 1025 terms, I am sure that it would be a great deal less expensive as well as environmentally more desirable than building many extra roads in the country.
The Earl of Caithness
I am glad that my noble friend Lord Wade of Chorlton has raised such an important matter. I should like to take the opportunity to pay tribute to the work that he has done, especially in the North West, in making the economy so successful in the rural areas. The Government recognise the important role that the railways play in many rural communities. I stressed that fact in answer to the first amendment moved this afternoon when we touched upon a similar matter. That is why we have taken pains to make clear on a number of occasions the Government's commitment to continue to pay subsidy for socially necessary, loss-making services for as long as is necessary.
We have also made clear that the statutory closure procedures will continue to be extremely vigorous. There is absolutely no reason to believe that privatisation will lead to more closures. Therefore, our policies already recognise implicitly the economic needs of rural areas.
Having said that, I have difficulty with inserting an explicit mention of economic needs of rural areas as my noble friend commends to the Committee because all of the objectives which the amendment embodies are already covered in the duties in Clause 4 as drafted. The duty in Clause 4(1) (a) to protect the interests of users of railway services and that in Clause 4(1) (b) to promote the use and development of the railway network to the greatest extent economically practicable are both relevant to the needs of rural areas as they stand. To add a specific reference to rural areas might imply that we thought that urban areas were in some way less important, which I am sure is not the intention of my noble friend.
The noble Lord, Lord Clinton-Davis, raised the question of regional railways and cross-country services. Those will be subject to separate franchises. Franchise areas are not necessarily geographically specific because the franchises will inevitably overlap, as BR profit centres do at the moment.
I listened with interest to what my noble friend Lord Marlesford had to say. Again, he returned to the issue of greater transparency regarding the loss-making services. I have no doubt that franchising and the work of the franchising director will be a revelation to many of us who wish to know where the taxpayer's money is being spent at present.
My noble friend Lord Wade of Chorlton also looked forward to Amendment No. 21. I have to point out that the railways are different from the gas, electricity and water services. I believe that if he reflects upon it he will see that Amendment No. 21 would have all sorts of unforeseen consequences in distinguishing between first class and standard class passengers. That would lead to problems that would be capable of being remedied only by allowing a franchisee to try to provide the service that most people in that part of the world wanted. It might be that in some rural areas there is a greater demand for first-class services than in other rural areas. To try to 1026 make everything the same would inhibit the travelling public from being given the type of services that they deserve and which we believe the franchisees will be able to give them in the future.
I am grateful to my noble friend for raising this important point. I hope that I have been able to set his mind at rest.
§ Lord Wade of Chorlton
I am grateful to my noble friend for the way in which he replied to the amendment. There are a number of issues which I feel he did not address. I still do not understand how in practice a franchisee will be structured to be able to afford to run a rural railway and to make use of the funding which now goes to British Rail. However, in order to make progress, I shall not press the matter. Perhaps my noble friend will allow me to contact him and have a conversation with him about that matter. If that is satisfactory, there will be no need to take the matter further at Report stage. I beg leave to withdrawn the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 10 to 11 A not moved.]
Lord Brabazon of Tara moved Amendment No. 12:
Page 4, line 37, at end insert:
("(c) the interests of users and potential users of services for the carriage of goods by railway provided by a private sector operator, in respect of—
in cases where the circumstances appear to the Secretary of State or, as the case may be, the Regulator to be such as to give rise, or be likely to give rise, to a situation where railway services are being provided where no competitive transport market exists.").
§ The noble Lord said: I put down the amendment two days ago and my noble friend Lord Kimball wished to support the amendment. Unfortunately, through a misunderstanding which I believe was entirely my own fault, my name was removed from the amendment and my noble friend Lord Kimball was left as its only supporter. That was a misunderstanding and I should like to move the amendment.
§ At Second Reading I said that I supported the full privatisation of British Rail but that, sadly, this Bill did not go so far as to permit that to take place. If we cannot have full-blooded privatisation, we must ensure that the present monopoly which is so damaging to free competition is not allowed to continue. On the passenger side that will be achieved by the franchising of certain lines to the private sector —a move which I welcome. That is a matter which is being greatly debated and will no doubt continue to be debated during the Committee stage.
§ However, with the rail freight industry the Bill fails in many respects to ensure that the highest degree of competition is promoted, in particular regarding the activities of the current Trainload Freight division of BR. Although I generally welcome the Government's announcement that Trainload Freight is to be split up, I wonder whether there will be enough competition if only three successor companies are created. Railfreight Distribution will remain intact as a monopoly carrier and, although open access to the track will be granted after April 1994, it is unlikely 1027 that that monopoly will be broken by new entrants for some considerable time after that. Therefore we must ensure that, if a monopoly situation persists in the future rail freight industry, the customer is protected.
§ There are a number of natural monopolies in the rail freight industry either through geographical position or economies of scale. That underlines the point that the end user—the rail customer—must be protected; and, as in other privatisations, the only person able to do that is the regulator.
§ The aim of the amendment is to permit the regulator to take a legitimate and healthy interest in the prices charged and the quality of service provided by a rail operator in circumstances where no competitive market exists. Where there free competition between different rail freight operators, the price charged by the track authority should be self-regulating. However, there is the possibility that some freight customers may still face the unenviable prospect of a situation where rail is the only mode by which goods can be moved and the number of operators offering their services is limited in the extreme. Stimulus may therefore need to be given to the promotion of "on the rails" competition in those circumstances. The regulator appears to be the only person able to promote it.
§ The amendment is not detailed. It does not seek in any way to prescribe in detail the approach that the regulator should adopt. That is for him to decide.
§ In effect, the amendment merely seeks to reinforce an amendment achieved in another place and tabled by my honourable friend the Member for Worcester which widened the scope of the regulator's activities to include a general commitment to the promotion of competition for the carriage of goods by rail.
§ After all, there is support among all parties represented in the Chamber for the principle that as much freight as possible should be encouraged to move from our heavily congested roads on to the railway system. The amendment will help that process in a small way. The amendment is simple. It protects the interest of the private sector against current and future monopolies. I believe that that ought to be a principle which the Government welcome. I hope that my noble friend will accept the amendment, or at least welcome the principle that underlines it. I beg to move.
The Earl of Caithness
I can understand that the rail freight customers, like any group of businessmen, are keen to protect their interests. I appreciate that their anxieties are genuine. However, I believe that the worries expressed by my noble friend are unfounded. I am glad to have the opportunity to explain the Government's position to the Committee.
It is the Government's intention to foster within the UK a competitive, liberalised rail freight market which gives customers a genuine choice and which allows the industry to develop away from the strait-jacket of nationalised industry controls. The experience of the US rail freight industry demonstrates how rail freight can prosper when freed from heavy-handed regulatory intervention. We believe that deregulation is vital to encourage new rail freight operators to enter the market, as well as stimulating 1028 the privatised ex-BR businesses to offer a more efficient and competitive product. That is not to say that there should be no protection for customers, however powerful they may be (and the larger rail freight customers are very powerful indeed).
First, Clause 4(1) (a) places the Secretary of State and the regulator under a duty to exercise their functions in a manner which they consider best protects the interests of users of railway services. That general duty naturally covers rail freight customers as well as other users of railway services.
Secondly, we have developed a track access regime which requires the regulator to approve the terms of all access agreements with facility owners. This means that Railtrack will not be able to exploit its market power unfairly when negotiating with rail freight operators and customers. Access agreements will be based on genuine commercial negotiation.
However, my noble friend's amendment seeks to go further by reinforcing the protections I have just outlined. I do not believe that the circumstances of rail freight justify such additional provision. Negotiations between customers and freight train operators will be conducted on a wholly commercial basis, in the same way that other businesses negotiate with road hauliers and shipping lines. There are two key points to bear in mind. First, as I mentioned earlier, the whole thrust of our policy is to stimulate the development of a competitive rail freight market. That is why we are splitting BR's trainload freight and contract services business into three entirely separate companies for privatisation. That is why we are introducing unfettered open access to the railway network for rail freight operators. If a rail freight customer does not like the price he is offered, or the quality of service he is getting, he will be entirely free to approach an alternative supplier and get a competitive quote.
Secondly, in the unlikely case that there is no competitive market for the transport of goods by rail in a particular locality, and the customer feels tied to rail, then existing competition law will come into play. I remind the Committee that we have extensive anti-monopoly legislation in the United Kingdom. If the Director General of Fair Trading has grounds for believing that a firm (including a private rail freight firm) has more than 25 per cent. of the market—which might mean the market in a particular locality—and is operating against the public interest, he can make a reference to the MMC. If the MMC report confirms monopoly abuse, the firm can be required to stop the offending practices.
I am sure the Committee will agree that this combination of a liberalised rail freight market, the general duties of the regulator and Secretary of State to protect the interests of railway users, and the existing framework of UK competition law will provide adequate protection for rail freight customers without the need for specific additional duties on the Secretary of State and the rail regulator.
§ 9.45 p.m.
§ Lord Brabazon of Tara
I am grateful to my noble friend for that reply to the amendment which I moved. I believe that we all genuinely wish to see an increasing 1029 amount of freight moved by rail and, therefore, it is essential that potential customers for moving freight should have the best terms made available to them. I liked the words my noble friend used about competition liberalisation in the rail freight market. I take the point about existing competition law and the powers of the Director General of Fair Trading which exist now and will continue to exist under the new regime.
The difficulty that I raised of the alternative supplier was answered by my noble friend. I wish to withdraw the amendment. I shall study carefully what my noble friend said and if I have further comments to make on the issue, I shall come back at a later stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ The Deputy Chairman of Committees (Lord Grantchester)
If Amendment No. 13 is agreed to, I cannot call Amendment No. 14.
The Earl of Caithness moved Amendment No. 13:
Page 5, line 2, leave out from beginning to ("in") in line 13 and insert ("in exercising the functions assigned or transferred to him under this Part—
§ The noble Earl said: I beg to move Amendment No. 13, and, with the leave of the Committee, speak to Amendment No. 15.
§ The purpose of these amendments is to strengthen the financial duty of the regulator in relation to holders of network licences, of which Railtrack will be by far the most important. The financial position of Railtrack will inevitably be significantly affected by the actions of the regulator, both through his licensing functions and through his approval of access agreements. The Government have therefore always accepted that there should be a duty on the regulator relating to the financial position of Railtrack. In the current text of the Bill this duty is expressed as a requirement to have regard to the financial position of holders of relevant licences.
§ The first amendment seeks to strengthen this duty by requiring the regulator to do more than have regard to Railtrack's financial position: he is to act in a manner which he considers will not render it unduly difficult for Railtrack, and other network licence holders, to finance their activities. There are thus two key differences from the existing duty: the requirement to act in a particular way, not just to have regard to the financial position, and the specific reference to financing of activities. We believe that the changes will significantly strengthen the duty.1030
§ The remainder of the amendment relates to the coverage of the duty in relation to Railtrack's activities. The intention is that the duty on the regulator should apply to persons holding a network licence, but that it should apply to any of the activities of those persons affected by the regulator's functions, which may be wider than the licensed activities. Thus, in the case of Railtrack, the duty is to apply in relation to all its activities which might be affected by the regulator's decisions, including for example its role as owner of stations.
§ The rest of Amendment No. 13, and Amendment No. 15, are concerned only with the arrangement of the subsections of what is currently Clause 4(4). Since Amendment No. 13 requires some re-organisation of Clause 4, it is more convenient to make what was Clause 4(4) (c), the duty in relation to the interests of disabled persons, a new subsection of Clause 4. I beg to move.
§ Lord Clinton-Davis
I thank the Minister for explaining the rationale behind the amendment. I shall have to consider very carefully what he has said in this regard. I should like to raise with him a few points that are germane to this specific amendment. First, the amendment refers to the cut-off date, 31st December 1996, beyond which it will not be necessary to take into account the guidance from the Secretary of State. I believe I am right in saying that. If the cut-off date is to be 31st December 1996, I believe that it is far too soon after the franchising process has begun to work for guidance—which will cover matters of great importance such as the regulation of open access services to compete with franchises—to be rescinded. This is a matter which we would have alluded to. It depends on whether this amendment is negatived. In the unlikely event that it is, I understand that we cannot deal with Amendment No. 14, when my noble friend Lord Carmichael would have gone on to speak about the cut-off date in rather more detail. But we may return to that on another occasion.
Periods of four years are commonly mentioned in relation to the completion of the franchising process. That means that only those franchises which are completed before the cut-off date receive protection. I believe I am right in making that assumption.
The revised subsection (b) would appear to have the effect of tilting the balance between the need for operators to finance their operations—which are designed to maximise their profits, or certainly to make profits—and the need for the franchising director to maximise the benefits that he gets from his resources in favour of the operator. I wonder whether the Minister will be able to comment on those points.
Will the Minister indicate why subsection (c) does not also extend to the financial position of the PTAs and the PTEs, which under Clause 29 will be joint parties with the franchising director in letting a number of franchises. Why is their financial position not to be taken into account?
There is also a geographical dimension to which I would make reference. ScotRail, or the south-western lines of Network SouthEast, are early franchises to be protected; but services in cities such as Birmingham, Manchester, Leeds and Liverpool will not receive 1031 similar treatment simply because their franchises are not completed until after the rather magic date of 31st December 1996. I think I can leave it at that for the time being, and I shall be interested to hear what the Minister has to say.
The Earl of Caithness
I am glad to have the opportunity to respond to the noble Lord, and in particular to his concern regarding 1996 which has perhaps led to one or two misunderstandings that he might have had.
The Government wish to establish the regulator as an independent person carrying out his functions in the way that he thinks fit, and not subject to a continuing requirement to look over his shoulder to see what the government of the day want. That is the way that other regulators have been established. I believe that a considerable degree of independence is essential if they are to carry out their functions properly.
The only reason for the requirement concerning guidance from the Secretary of State for the first three years is to give the Secretary of State a way to provide guidance about the launch of the new regime, which the regulator is then required to take into account. Such a power was not needed in other major privatisations, partly because the transition to the new regime was shorter and partly because the other privatisations in general did not involve the establishment of a new financial regime in which the Government have a continuing involvement.
For those reasons we thought it right that the regulator should be required to take into account formal guidance from the Secretary of State during the establishment of the new regime. But we believe that it is both unnecessary and undesirable for the Secretary of State to have a continuing power to issue formal guidance. That would inevitably compromise the independence of the regulator. That is why we have a cut off date of 31st December 1996.
In the special circumstances of the new dimension for railways, it is a good idea that the Secretary of State has a modus operandi for getting information to the regulator. But it is also important that the regulator remains an independent person. We believe that a timescale to 31st December 1996 is the right way.
The noble Lord asked me about franchises and whether they would or would not be protected. They would all be under the same protection of the regulator and the franchising director. The difference will he that, after that period to 31st December 1996, the Secretary of State will not be able to issue directions to the regulator. The system will be up and running. It will be going forward on a proper and good basis. Therefore the oncoming franchises will be treated by an independent regulator. But the system and the way in which these things happen will have been established.
With regard to PTAs and PTEs, we felt that as they are funded in a different way, it would not be right to have the same amendment as we have for the regulator with regard to Railtrack. I hope that that answers some of the noble Lord's points.
§ Lord Clinton-Davis
I shall read with great care what the noble Lord said. These are important matters. However, I am by no means convinced about the rationale behind the cut-off date. I am not at all sure that sufficient experience will have been accumulated by that date. Indeed, earlier we debated matters which were highly germane to the cut-off date relating to the concessionary fares, discount fares and so on, where the guidance to be given by the Secretary of State to the franchise director is rather critical.
The time that is envisaged is just about three and a half years away—from the time that the operation begins it will be much less than that and perhaps only a couple of years. I do not believe that the Secretary of State has any reason for optimism to believe that within that time there will have been a sufficient accumulation of experience and knowledge to enable the system to continue on its own revs. That is perhaps a matter to which we can return later. The Minister stated what he believes, and I have stated what 1 believe. 1 am perfectly content to leave the matter there for tonight.
The Earl of Caithness
I shall just draw attention to the difference between the duties on the regulator and the duties on the franchising director. I am not sure whether the noble Lord slightly confused them.
§ Lord Clinton-Davis
No, no. It is not the same thing.
On Question, amendment agreed to.
[Amendment No. 14 not moved.]
Viscount Goschen moved Amendment No. 15:
Page 5, line 15, leave out second ("to") and insert ("tho Regulator shall").
§ On Question, amendment agreed to.
§ 10 p.m.
Lord Carmichael of Kelvingrove moved Amendment No. 16:
Page 5, line 16, at end insert:
("( ) No statutory instrument containing an order under subsection (4) above shall be made unless a draft has been laid before and approved by resolution of each House of Parliament.").
The noble Lord said: We hoped that Amendment No. 16 would be taken with Amendment No. 14, but as the earlier amendment moved by the Minister caused Amendment No. 14 to be omitted, we have to move Amendment No. 16. The amendment states:
No statutory instrument containing an order under subsection (4) above shall be made unless a draft has been laid before and approved by resolution of each House of Parliament".
§ We consider the question of guidance by the Minister to be too important merely to be left to the Minister without coming before the House. Our debates have shown how important it is that the views of those in the rural areas should be heard. Perhaps in bigger conurbations there are other ways of making the Minister aware of what should happen in terms of a statutory instrument. But we believe that any guidance that the Minister gives to the franchisee or to the regulator should have the authority of Parliament behind it in a positive and not in a negative way. I ask the Minister to give an indication that he will consider 1033 an approved resolution of each House, or give a reason why he thinks that that is unnecessary. I emphasise the great importance of hearing a voice, particularly from the rural areas, on this matter. I beg to move.
The Earl of Caithness
I shall have to study with care what the noble Lord, Lord Carmichael of Kelvingrove, said. I did not understand why he was moving the amendment. It relates to an order and was consequential upon Amendment No. 14, which specifies that there be an order relating to the date of 31st December 1996.
The noble Lord said that he wanted the advice that the Secretary of State is going to give to the regulators to come before Parliament. That is a different question. Given its nature, the advice will need to be flexible and will be for guidance rather than a specific instruction. Perhaps the noble Lord will allow me to attempt to give him a better reply at a later stage.
§ Lord Carmichael of Kelvingrove
I am grateful to the noble Earl. In a perfect world the advice of the Minister may be enough. But there may not always be a perfect situation. Therefore, the Secretary of State may feel that he needs something a little more firm. He may need to go as far as to obtain a regulation. I do not believe that everything works only on nods and winks. Some matters are too important for that. At the same time the Secretary of State may need more power. If he obtains that power it is vitally important that it should be by positive rather than by negative resolution.
That may have clarified the point that I was trying to make. It is complicated by the acceptance that Amendment No. 14 could not be moved. However, I hope that the Minister will consider the point and I look forward to his explanation. We can then see whether there is any way of achieving the desired effect from my side and from the point of view of the people who asked me to table the amendment in terms of control of the franchisee by the Minister. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 17 to 18A not moved.]
On Question, Whether Clause 4, as amended, shall stand part of the Bill?
§ Lord Renton
I have not given my noble friend notice of this but I do not think that he will suffer as a result of my not giving notice. Of course I would not challenge Clause 4 because I am in favour of stating the principles on which those charged with responsibility under the Bill shall be given duties under it. But I would ask my noble friend to look at the bottom of page 3 where he will find in subsection (1):The Secretary of State"—who, by the way, can be challenged in Parliament—and the Regulator"—who cannot be challenged in Parliament—shall each have a duty to exercise the functions assigned or transferred to him"—that means, in this case, each of them respectively, I hope and believe; the word "him" cannot refer to one of them only— 1034under or by virtue of this Part in the manner which he"—that means each of them respectively—considers best calculated",to do the various things set out. But the use of the expression "which he considers best" means that neither of them can be challenged. The Secretary of State might be challenged a little in Parliament but he has only to say, "This is what I think is best", and no one can undo that. I should have thought that it is in the public interest that, instead of the expression, "which he considers best", the subsection should read, "which is considered best in the public interest". Then it would be open to people who feel that the admirable aims which are then set out in paragraphs (a) to (g) had not been fulfilled to take the matter to the court.
I do not ask my noble friend for an answer at this moment on these points. That would not be fair. But I ask him to consider between now and Report stage whether this is the best way of expressing the heavy responsibilities which are required.
The Earl of Caithness
I take careful note of what my noble friend Lord Renton has said. I should like to consider, when I see the Official Report, what he has said and discuss it.
Clause 4, as amended, agreed to.
Clause 5 [General duties of the Franchising Director]:
Lord Carmichael of Kelvingrove moved Amendment No. 19:
Page 5, line 46, at end insert:
("( ) to promote the interests of users of passenger rail services and improve the quality of services available to them;
( ) to promote good working practices, training and conditions of service for railway staff in the interests of providing safe, high quality services;").
§ The noble Lord said: I move this amendment on behalf of my noble friend Lord Ewing. The amendment is rather more broadly based than those we have had before in that it seeks to ensure that the franchising director shall have as his first priority the interests of passengers and the quality of the services they receive. Therefore the two new subsections are placed ahead of those dealing with the guidance to be given by the Secretary of State and financial matters.
§ Some Members of the Committee will remember the experience of bus deregulation which has shown that there are great dangers of subsidised service contracts being determined almost exclusively on the basis of price. Few tendering authorities have been able, within the framework of the Transport Act 1985, to put quality control above price. The result is that many contracts are operated by old vehicles and by staff who seem to receive little or no training. In some of the areas that I know where there has been privatisation the buses are extremely old and are frequently very dirty. They are quite unlike the special franchise buses that one sees in London. They have been variously named. One or two of them are of a very high standard in a different way.
§ This amendment is designed to focus attention on the need to pursue the objective that franchises are let on the basis of quality as well as price. Part of that is to ensure that conditions such as training and the 1035 pensions of the railway staff employed by the franchisees are conducive to the provision of safe and high quality services.
§ I said before that bus deregulation has shown us a great deal. It has put great pressures on staff, particularly those who were used to the old service ways rather than the purely commercial methods. There are frequent complaints from passengers in areas which I know personally outside London about staff attitudes and the ways in which the services are operated.
§ I hope that the Minister will take on board that this is a genuine attempt to look at the problems that can arise with the franchise director if he does not take this part of his duty of passenger satisfaction very seriously indeed. I beg to move.
§ Lord Redesdale
I support this amendment. I believe that in one respect it goes to the heart of the privatisation problem in that it is not a vertical system. Sixty per cent. of the costs will be spent on the track. If that money is tied up in that way and more money is tied up in the leasing of the railway stock—most of which will be the cheapest which the franchisees can lay their hands on and the oldest stock—it means that with any franchisee who is then going to try to save money (which many management buy-out companies will have to do) the largest unit cost on which he can save will be labour.
The difficulty is that, if one cuts back on the number of people working on the railways, it will lead to problems of safety. In addition, it will probably lead to a service which is not of benefit to the customer. We hope that the Minister will deal with these points when he replies.
The Earl of Caithness
Our proposals for franchising are based on our desire to see better services on offer to passengers. This will come, we believe, from the involvement of the private sector and a closer focus on the passengers' interests. It will clearly be necessary to structure franchise agreements in a way that ensures that franchisees are focused on their customers' requirements, and that provides them with the flexibility to respond to those requirements but includes such safeguards as are necessary to protect the passengers' interests. We are, for example, proposing amendments which will place a duty on the franchising director in respect of fares control.
I am not convinced that it would be right to impose the sort of duties Amendment No. 19 envisages in Clause 5. The duties in that clause have deliberately been set at a high level and relate to two areas: the fulfilment of objectives set for the franchising director by the Secretary of State and the need to ensure that payments made by the franchising director are such as he reasonably considers will achieve those objectives economically and efficiently.
The objectives the Secretary of State will set will go into considerably more detail than would be appropriate on the face of the Bill. We have already made available a first draft of how these objectives might be framed in a paper provided to the Standing Committee which considered this Bill in another place. I have made sure that copies are available in the 1036 Library here. That draft made reference to the need for the franchising director to protect passengers' interests and to promote the use and development of the railway network.
When the franchising director is appointed, subject. to this Bill becoming law, the objectives set by the Secretary of State will be a public document. The objectives will be published and a copy will be laid before Parliament for noble Lords to scrutinise.
The franchising director will clearly need to have regard to the interests of rail passengers and the quality of service on offer when granting franchises and monitoring franchisees' performance. He will be looking for service improvements to come from improved efficiency, innovation and better responsiveness to customer demand. He will also need to have regard to the value for money offered by franchisees, and would need to consider carefully proposals for improved quality which would result in higher fares or increased subsidy.
The franchising director might also wish to take an interest in the working practices of franchisees, in so far as these impact on the franchisees' ability to deliver the specified service. But I am not convinced of the need for him to have a duty on the face of the Bill in respect of this area.
The noble Lord's amendment also mentions training. Training will of course be critical for staff carrying out safety-related functions. But this is not a matter for the franchising director: he has no safety functions. Training was covered in some detail in the Health and Safety Commission's report and is a matter for the Health and Safety Executive. An operator's arrangements for ensuring his staff have adequate training will be dealt with in the railway safety case. I believe that answers the point raised by the noble Lord, Lord Redesdale. It is not a question of the licence. This comes into the safety case because, as I said at the beginning of our discussions today, safety is of prime importance. That is why the 37 recommendations have been agreed by the chairman of British Rail and the Government. These arrangements will be dealt with in the safety case, with the Health and Safety Executive overseeing the whole operation.
§ 10.15 p.m.
§ Lord Carmichael of Kelvingrove
I am grateful for the full explanation that the Minister has given. I believe that most of his examples were accurate. The point that the noble Lord, Lord Redesdale, and f have been trying to get over is that everything is not perhaps as the Minister had thought. I referred earlier to the example of bus franchises in London. which is the one example that I know is different. The quality of the service provided, of the staff and the vehicles has been extremely high. I have visited a number of other areas of the country—not only in Scotland—where, sadly, staff morale looks very poor. The quality of the vehicles used is also very poor. The whole feeling is of neglect. That is what we are trying to prevent by our amendment.
I shall read the Minister's reply with great care. But I hope that he will realise that what we have been 1037 concerned about is true of many franchises. I do not know how railway carriages could become "rundown", but I believe that, especially in rural areas, they may deteriorate and the services provided may be much poorer than is the case now under British Rail, even with all the criticism that it now receives. Nevertheless, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Clinton-Davis moved Amendment No. 20:
Page 6, line 9, at end insert:
("(c) to promote the use by persons not resident in the United Kingdom of the rail network, by ensuring there are available for purchase by them documents entitling them to free access to all railway services provided through a franchise agreement").
§ The noble Lord said: This is a probing amendment. We touched on this issue earlier when the noble Baroness, Lady Stedman, referred to something that I had said previously about BritRail. She commented on the importance of BritRail in promoting, in particular, the inward tourist industry in the United Kingdom. Railcards for inward tourists can only be purchased abroad, as I understand it; they cannot be purchased in this country. They provide for a wide area of travel on our rail network and have proved extremely successful. Consequently, I should like to know how, in practice, that type of facility is to be made available in future.
§ The Minister said earlier that this matter would not be within the remit of the franchising director. Consequently therefore there will be a problem for tourist organisations. With whom will they negotiate? Who will be responsible for promoting abroad the United Kingdom's rail services? Is it to be left to that large number of franchisees merely to get together in an umbrella organisation to do that? It is a great pity that the services which can be advertised successfully abroad by British Rail will not be able to be continued in the same way.
§ What assessment have the Government made through discussions with the tourist industry to see what impact their proposals will have upon that industry, and, in particular, in relation to the survival of something like the BritRail card? The Government cannot say, "Well, it will all take care of itself". Things do not happen like that. There is an existing facility. It will not be easy to replace it, particularly with the proliferation of different interests involved. The one thing about franchisees is that they do not have a common interest, although I accept that it may be said that they have a common interest in attracting tourism to this country. There, the situation disintegrates a little, because they will not have identical interests in promoting the services of other franchisees.
§ I shall refer to the impact of rail services in terms of the definition of social need. Does the impact of rail services on the tourist industry fall into that category? I suspect not. Will such services be included in the ScotRail franchise? I do not know whether the Minister can reply to that question. The situation in the west of Scotland, for example, as I understand it, is that a number of seasonal summer services are operated by BR. They are important to the economies 1038 of the areas in which they operate. They also have the happy advantage of being able to provide tourists with rail rather than road facilities. That is an important factor, not merely from the point of view of the rail system itself, but in terms of the environment and so forth, a matter to which noble Lords alluded in earlier debates.
§ I have raised a number of questions in relation to the amendment. I do not propose to test the feeling of the Committee on this matter, but I shall be interested to hear what the Minister has to say.
§ Lord Mountevans
I am grateful to the noble Lord, Lord Clinton-Davis, for raising this topic which is one upon which I touched on Second Reading. Tourism is an undoubted success. I know that my erstwhile colleagues in the British Tourist Authority greatly appreciate the support from British Rail which they have enjoyed for many years. One of the easiest products to sell abroad is the BritRail pass. I know, because I have done the selling, if not the physical booking.
The ability to travel unrestricted all over the BR network is an attractive one. The card is a product we must retain, not least because we compete with many other countries or even groups of countries which offer similar products. It is a lucrative product for BR, or for the railways, as we shall shortly call them, I suppose. In general, tourists make use of off-peak capacity. It is not easy to think in terms of BR services specifically and uniquely provided for foreign visitors. The fact that such visitors travel the length and breadth of the land is to be welcomed, because, on the one hand, that relieves the pressure on London and, on the other, it spreads economic benefits to those areas which need all the economic help that they can get. Here one is reminded of the amendment moved earlier this evening by my noble friend Lord Wade of Chorlton.
It could be argued that there is a revenue distribution problem, but the mechanics for dealing with it are already in place, as my noble friend the Minister conceded on Second Reading. All the advantages of the BritRail pass apply just as strongly to InterRail cards which are bought by much younger people. The added tourism benefit of the InterRail card is that the young tourist of today is the repeat visitor of tomorrow. I share the anxieties expressed by the noble Lord, Lord Clinton-Davis, about how the product will be assembled and sold. I, too, look forward to hearing my noble friend's answer.
§ Lord Redesdale
I wish to speak to this amendment as some years ago I travelled the length and breadth of Europe on an InterRail card. That was a thoroughly enjoyable experience. That is a system that has been agreed among state run railways. How will the franchise operators in this country reach an agreement that will allow this service to continue? Will citizens of this country be able to continue to make use of the InterRail service if it is no longer a reciprocal service? Will the Channel Tunnel be open to InterRail cardholders to enable them to sample the delights of cities such as Edinburgh, York or even Newcastle?
The Earl of Caithness
The Government are certainly keen to promote the use of the railway whether by UK residents or incoming visitors. This is already reflected in the regulator's duties in Clause 4. Similar objectives are likely to be placed on the franchising director through guidance given to him by the Secretary of State under this clause. The Government also recognise the value of the railways to travel, trade and tourism. In response to the report of the Transport Committee in the other place, the Government pointed out that marketing rail services to incoming tourists is a substantial business. Sales of the BritRail pass alone represent some £15 million a year. The Government are confident that such an arrangement, which makes sound commercial sense for BR now, will be equally attractive to future operators. I imagine the private sector would be only too keen to increase its revenue. If the BritRail card can produce that amount of money now, it is obvious that the private sector would wish to take advantage of it. The Government therefore propose that it should be for the rail operators to develop appropriate arrangements for the future.
I shall now reply specifically to the points raised by the noble Lord, Lord Clinton-Davis. The rail operators will be able to co-ordinate their arrangements through the joint industry arrangements, as necessary, in conjunction with the travel and tourism industry. Detailed arrangements to facilitate this are under discussion. Until those have reached a conclusion I am unable to go further. I take the noble Lord's point about the summer services of ScotRail. I believe that once ScotRail is franchised, it will want to provide summer services for residents of the United Kingdom and for tourists that are as good if not better than the present services.
§ Lord Clinton-Davis
I have listened to what the Minister said. I am not entirely satisfied with his reply but we shall have the opportunity to return to this matter at a later stage if necessary. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 21 and 22 not moved.]
Clause 5 agreed to.
Clause 6 [Prohibition on unauthorised operators of railway assets]:
Lord Carmichael of Kelvingrove moved Amendment No. 23:
Page 7, line 8, at end insert:
("( ) Nothing in this section shall be deemed to refer to London Regional Transport or railway undertakings owned and operated by any Passenger Transport Executive.").
§ The noble Lord said: The Bill before us is exclusively concerned with the break-up and disposal of the assets and services of the British Railways Board. However, it appears that the Government were faced with a problem while drafting the Bill in that an exclusively "British Railways" piece of legislation would be deemed hybrid and require a more cumbersome parliamentary procedure. To avoid this problem the Bill's scope was widened theoretically to embrace all railway undertakings even though the Government have (as far as we know) no intention at 1040 present to interfere with London Underground, the PTE-owned services like Glasgow Underground and Tyne and Wear Metro or, indeed, any other railway undertaking in Great Britain.
§ The legislation as drafted will therefore require the Government either to go through a laborious process of licensing every railway company in the land—including preserved steam services in private ownership—or, more likely, use the powers in Clause 7(2) (a) to exempt everyone except British Railways and prospective franchisees from the obligation to be licensed. If such an exemption were to be made, the Government would have effectively brought to Parliament, under the Public Bill procedure, a measure which in reality is a piece of hybrid legislation. This is quite a serious parliamentary point. I hope that the Minister will deal with the matter. We should prefer to have a British Railways Bill rather than a Railways Bill. I beg to move.
§ 10.30 p.m.
The Earl of Caithness
Our policy towards London Underground and other public sector urban arid suburban railways was set out in a paper on exemptions which the Department of Transport published on 24th May of this year. Although the noble Lord, Lord Carmichael, made a persuasive case for his amendment, I believe that the situation is rather more complex than he realises.
We intend to exempt most of the activities of these railways from the licensing requirements in the Bill, as well as from the access and franchising requirements. But there are a number of places where London Underground, in particular, shares track or stations with British Rail; and it may be necessary to issue a limited licence to London Underground in respect of these particular facilities. This will be possible using the licensing and exemption powers in the Bill; but if the licensing powers did not apply then this could create difficulties.
The overlap between London Underground and British Rail means that the matter is not so simple as the noble Lord portrayed it when moving the amendment. The overlap means that it is not possible to exempt everything other than British Rail. When we considered this difficult problem, we thought it best to deal with the matter by way of the exemption procedure.
§ Lord Carmichael of Kelvingrove
I am grateful to the Minister. If I followed his explanation properly, he seemed to suggest that his advisers and he had been aware of the hybridity problem when the Bill was drafted. I thought that I had mastered what was meant by hybridity when the Aircraft and Shipbuilding Industries Bill passed through another place many years ago. That was a piece of parliamentary history. One speaker said that the Bill was not hybrid and another speaker said that it was. In fact, it was necessary to change part of that Bill. Is the Minister aware that there is a sneaking possibility of hybridity in this legislation?
I know that the learned Clerks of both Houses love to get their teeth into the question of hybridity. 1041 Perhaps the Minister will confirm that he is at least aware of the question of hybridity and that is why the method which was chosen was chosen in order to avoid that. In the meantime, I shall be happy to read the Minister's explanation and consider whether we should return to this matter at the next stage of the Bill. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6 agreed to.
Clause 7 [Exemptions from section 6]:
Baroness Stedman moved Amendment No. 24:
Page 7, line 47, at end insert ("and the Regulator shall in every case send a copy of the notice to the Central Committee and to every consultative committee likely to be affected by the grant of the licence exemption.").
§ The noble Baroness said: In moving this amendment, I shall speak also to Amendments Nos. 26, 35 and 37 to 39. This group of amendments deals, in Clauses 7 to 23 of the Bill, with licensing, access agreements and franchising, all of which are vital components of the operation of the proposed arrangements.
§ As the Bill stands at present, there is no reference in those clauses to the central consultative committee or the new consultative committees. I believe that there should be a requirement that those committees are consulted at appropriate stages to ensure that the needs and wishes of consumers are taken into account.
§ I am sure that it would be extremely helpful to the Committee if the Minister found himself able to give a commitment that he expects these committees to be consulted on the issues.
The first of the amendments, Amendment No. 24, places an obligation on the regulator in Clause 7 to give notice before granting a licence exemption and requires him to consider the representations and objections to any such proposal. In so doing, he is obliged to publish a notice in such a manner as he considers appropriate for bringing the proposal to grant a licence exemption to the attention of the
persons likely to be affected by the grant of the licence exemption".
The clause does not specify anywhere who are the
persons likely to be affected by the grant of the licence exemption".
This amendment seeks to ensure that the regulator includes the Central Rail Users' Consultative Committee and the other relevant consultative committees among the people who are to receive a copy of his notice, so that the statutory bodies that are set up under the Bill to represent the rail users have the opportunity to consider and comment on any appraisal by the regulator to grant the licence exemption.
§ The same applies to Amendment No. 26 which amends Clause 8 specifying the circumstances in which and the procedure by which the Secretary of State and the regulator can grant the licences authorising a person to be the operator of the railway assets specified in the licence.
Before granting a licence, the Secretary of State or the regulator must give notice and is required to consider objections to any such proposal. In so doing,
they are again obliged to publish a notice in such a manner as they consider appropriate for bringing the proposal to the attention of the persons likely to be affected by the grant of the licence. Again, it is not specified who are the
persons likely to be affected by the grant of the licence".
The amendment seeks to ensure not only that the Secretary of State or the regulator includes the CRUCC and the relevant consultative councils among the people who receive a copy of his notice, but that they also receive a copy of the licence which it is proposed to grant. That would ensure that the statutory bodies set up under the Bill to represent the rail users have the opportunity to consider and comment on any proposals to grant a licence as well as the proposed terms of the licence.
§ In the same way with Amendment No. 35 amending Clause 10, there are obligations that the regulator should give notice before making modifications to a licence and be required to consider representations and objections and, in so doing, is again obliged to publish a notice and bring it to the attention of the persons most likely to be affected.
§ It seems to me that the persons most likely to be affected are again the central consultative council and the other councils. That would ensure that those who are the watchdogs and guardians, as it were, of the consumers' interests are the likely bodies to be included and should be mentioned on the face of the Bill.
Again, with Amendment No. 37 regarding Clause 11, we have the same vague phrase to the effect that the attention of the persons likely to be affected should be drawn to the obligation on the regulator to publish the particular
reference or variation in such manner as he considers appropriate".
§ It is important that the statutory bodies that are set up under the Bill to represent rail users are aware of any reference in this instance to the Monopolies and Mergers Commission on matters relating to the modification of licences. They have in the past made submissions to the MMC when the commission has undertaken investigations into various aspects of British Rail services. It would be wrong for the regulator to be able to make a reference to the MMC without being obliged to notify the new statutory bodies which represent the passengers.
§ Amendment No. 38 to Clause 12 again refers vaguely to those persons who are likely to be affected. I am sure that, if the provision referred to the statutory bodies, it would be much plainer to everyone. The amendment seeks to tighten up the procedure to ensure that the regulator is obliged to send to the central consultative council and the other consultative councils a copy of the MMC's report when he receives it. That would mean that the statutory bodies set up to represent the rail users would have the opportunity to consider such a report prior to publication. By nature of the reference, any such report is likely to have a direct bearing on the exercise of the committees' statutory duties.1043
§ Amendment No. 39 is the last amendment in the group and deals with Clause 13. Again, we have the same vague phrase that the people to be consulted are those, "likely to be affected by it".
§ We believe that it would be much better if the statutory body representing rail users should be named in the Bill and, therefore, have the opportunity to consider all such points as they arise. I beg to move.
I can entirely understand why the noble Baroness wishes the consumer committees to be provided with copies of important documents such as reports by the MMC. It is, of course, vital that they have the information that they need to represent passengers properly. However, we are quite clear that it is not necessary to legislate to achieve that aim. There is also no point in burdening committees with piles of papers, many of which are standard or, indeed, not relevant to their activities. For example, many licences will be awarded to bodies outside the scope of the committees such as freight train operators, "open access" passenger train operators and light maintenance depot operators. Similarly, the amendments would require papers connected with an MMC reference to be sent to the committees, even if the subject of the reference was about the freight railway.
I hope that I can reassure the noble Baroness that the Secretary of State and the regulator may be relied upon to provide information which is relevant to the work of the committees. As the noble Baroness, Lady Stedman, stated, most of the information is in any event published; for example, in Clause 12 there is a requirement that the MMC's report be published in a mariner appropriate for bringing the report to the attention of persons likely to be affected by it. That would cover the relevant committee. It is open to the committees to inspect and obtain copies.
We are very conscious that the committees are not full-time professionals but people who volunteer to represent their fellow rail users. Their time is limited; they also have very limited staff resources. We are most reluctant to waste their valuable time by burdening them with piles of papers, many of which are essentially identical or simply not relevant to their activities. That would serve only to reduce the time that they can spend helping passengers with difficulties or commenting on important issues relating to service quality. I would, therefore, ask the noble Baroness to withdraw the amendment.
§ Baroness Stedman
I am grateful to the noble Viscount for his reply. However, I am also disappointed. I had a feeling that the Government might for once say that they would accept such a set of amendments and would write the statutory bodies into the Bill. As the night went on, I felt my halo becoming tighter and tighter; I had hoped that I would be going home wearing one because I was able to say that we had at least persuaded the Government to say yes to something.
I am sorry that the Government have resisted the amendments. I shall read the noble Viscount's response and perhaps return to the matter at the next 1044 stage with a slightly different approach. However, in the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Caithness moved Amendment No. 25:
Page 8, line 21, leave out subsection (9) and insert,
("(9) A licence exemption may be granted under subsection (1) above only if—
and a licence exemption may be granted under subsection (3) above only if the licence exemption is not to come into force until after that day.").
§ The noble Earl said: In moving the amendment I shall, with the leave of the Committee. speak also to Amendment No. 34. The amendments are intended to address some problems which might occur where trains are operated partly by virtue of a licence and partly with the benefit of an exemption. It is inevitable that some trains will operate partly on licensed and partly on unlicensed lines. We need to clarify the effect of licensing conditions in those cases. not least in relation to the possibility of fares conditions being set by the regulator. One particular case where such issues may arise is in relation to the proposed Heathrow Express service, which was raised by my noble friend Lord Brabazon of Tara on Second Reading.
§ Amendment No. 25 allows exemptions to be granted by the Secretary of' State at the outset, before the licensing regime comes into force, even though the exemption may not come into force immediately. That may be helpful to remove uncertainty as to whether a rail project in the planning or construction phase is to be licensed or exempted from the licensing regime when it starts operation. My right honourable friend the Secretary of State for Transport has already been approached by the promoters of the Heathrow Express scheme seeking that sort of clarification.
§ Amendment No. 34 inserts a new clause after Clause 9 to clarify the conditions of licences in relation to exemptions. Although the details of the drafting are rather complex, the basic approach we have adopted in the amendments is quite simple. Where a person is operating a railway passenger service partly by virtue of a licence and partly with the benefit of an exemption, we want the conditions of the licence to apply only to the extent that the train is operated by virtue of the licence. We wish to avoid imposing licence conditions in relation to the exempted operation. If we thought it appropriate to impose such conditions the right course would be not to grant an exemption. Subsection (1) of the new clause sets all this out.
§ The difficulty with that approach is how to handle conditions which by their nature must affect both the licensed and unlicensed operation. An example might be a condition relating to the type of train to be used on the licensed track. Where it is proposed to run a through service using both licensed and unlicensed track such a condition would inevitably affect operations on the unlicensed track also. Subsection (2) provides that such conditions may be imposed.1045
§ Subsection (3) of the new clause covers fares conditions. An operator of railway passenger services which are, to use shorthand, partly licensed and partly exempt, will want to know whether he is potentially subject to fares control through a condition of a licence. The approach we have adopted is again straightforward. Exempt services should not be potentially subject to fares control, whereas that should be a possibility for licensed services. Where a service is partially exempt and partially licensed it should not be subject to fares control unless the journey in question involves at least two consecutive stops during any part of that journey throughout which the operator of the train operates by virtue of a licence.
§ Subsections (4) and (6) of the new clause provide the formidable list of definitions needed to turn those general principles into legal reality. Finally, subsection (5) provides that the fares provision in subsection (3) has effect notwithstanding anything in subsections (I) and (2), and also provides that Clause 9 is to be subject to the provisions of the new clause.
§ I hope that the Committee will agree that this new clause properly provides for the position where services are partly exempt and partly licensed.
§ 10.45 p.m.
§ Lord Clinton-Davis
This is the situation to which I alluded at the very beginning of our discussions today. How on earth can we give proper consideration to these very complicated amendments, notwithstanding what the Minister has said? It is unsatisfactory that at this stage we should be expected to deal with these matters. I do not believe that they necessarily fell within the scope of the undertakings given in another place. The Government have had enough time to put their house in order. It is regrettable, to say the least, that we should now have to deal with these matters, which were starred amendments yesterday.
I do not propose even to try to do so. I take note of what the noble Earl said, but it places restrictions on us at Report stage when we are faced with a position like this. However, there it is. It is water under the bridge now. I merely say that, in relation to this and the next group of amendments which the Minister will move, I am not in a position to offer any response to what he read out.
§ Lord Brabazon of Tara
Unlike the noble Lord, Lord Clinton-Davis, I am most grateful to my noble friend for having moved the amendments. They address an issue which I raised at Second Reading. I am very grateful to my noble friend for having brought them to the Committee. Admittedly he did so only yesterday or the day before, but at least he has produced an amendment in response to a point that I raised at Second Reading. That is exactly the purpose of Committee stage in this House.
They are complicated amendments. If one looks merely at subsection (3) (b) of Amendment No. 34 one sees the words:at least two consecutive scheduled calls at stations during any one continuous spell of licensed operation".1046 The amendments need careful study. I am most grateful for what my noble friend said in response to the points that I made at Second Reading. I shall wish to study the amendments in detail, but I am grateful that my noble friend has gone as far as to move the amendments at this stage.
The Earl of Caithness
I am grateful to my noble friend Lord Brabazon for his welcome of the amendments. Of course, I look forward to discussing them at a later stage. I thought that it would be helpful to the Committee to put them down as soon as possible so that the noble Lord, Lord Clinton-Davis, had at least some time to look at them. I know that he was busy with the Bill on the Maastricht Treaty yesterday. However, it seemed to me best to get the amendments on to the Marshalled List and into the Bill so that we could come back to them at a later stage.
On Question, amendment agreed to.
Clause 7, as amended, agreed to.
Clause 8 [Licences]:
[Amendment No. 26 not moved.]
Clause 8 agreed to.
Clause 9 [Conditions of licences]
The Earl of Caithness moved Amendment No. 27:
Page 10, line 8, leave out ("the activities authorised by") and insert ("the licence holder's being the operator of railway assets under the authorisation of").
§ The noble Earl said: In moving Amendment No. 27, with the leave of the Committee I shall speak also to Amendments Nos. 28 to 33 inclusive.
§ These are clarificatory amendments. They do four things. Some are designed to clarify the scope of conditions which may be imposed in licences. Some are to permit specific matters covered in licences to be made subject to approval of persons other than the regulator. One amendment concerns the persons to whom payments may be made as a requirement of licence conditions. One amendment is consequential on earlier changes.
§ Amendment No. 27 is purely consequential on changes to Clause 6 made in another place. It brings the terminology into line with that now used in Clause 6.
§ Amendment No. 28 concerns payments required under a licence. Clause 9 currently provides for payments only to the grantor of the licence, that is, the Secretary of State or the regulator. There are two difficulties with this. One is that we wish payments required under licences to be made normally to the regulator. Replacing "the grantor" by separate references to the Secretary of State and the regulator permits this. The second difficulty is that we may wish to require payments to be made to other persons in some circumstances. For example, we may wish to use a licence condition to require payments to be made to the employer of the British Transport Police. The amendment would permit this.
§ Amendment No. 29 provides for conditions in licences to require the licence holder to enter into any agreement with any person for such purposes as may be specified in the conditions, and for the conditions to include provision for determining the terms on which 1047 such agreements are to be entered into. This amendment is intended to make it clear that licence conditions can require the licensee to enter agreements concerning, for example, through ticketing or common operating procedures. Agreement of this sort will be essential to the proper functioning of the railway system. Given what the noble Lords, Lord Clinton-Davis, and Lord Carmichael of Kelvingrove, said earlier, I would think that the provision will be extremely welcome to them.
§ Amendments Nos. 30, 31 and 32 are all intended to widen the provisions in Clause 9(2) to permit persons in addition to the regulator to be given a role in imposing requirements, consenting to things being done or not done, or determining questions arising under the licence. In many cases such questions would probably be reserved for the regulator, but it may be appropriate in some circumstances for the licence to specify other persons for such tasks. Perhaps I may give the Committee examples. I refer to the Health and Safety Executive, or the British Transport Police Committee on matters concerning policing.
§ Amendment No. 33 makes it clear that two further areas may he covered in licence conditions: referral for approval of such things falling to be done under the licence as are specified in the licence, and the provision of documents or other information to a qualified person in connection with any functions of that person under the licence. In both cases the person by whom the approval must be given, or to whom the documents must be supplied, may be any person specified for that purpose in the licence, though in the case of the provision of documents there is a separate requirement to provide them to the Secretary of State or the regulator for the purpose of exercising their functions under Part I of the Bill.
§ Subsection (2A) of the same amendment provides for conditions in a licence to be modified or to cease to have effect in circumstances specified in or determined by or under the licence conditions. This provision and all the previous provisions of this and the related amendments are without prejudice to the generality of Clause 9(1) (a). I should also add that all of those clarifications of the coverage of licence conditions are precedented in previous privatisations.
§ Finally the provision in subsection (2C) of the amendment contains the definition of a "qualified person" as used earlier in this and related amendments. A qualified person is a person specified in a licence for the purpose in question, a person of a description so specified or a person nominated for that purpose by such a person. That is a fairly wide description, but it may be that in some cases the appropriate person will not be established until after initial licences have been issued, so a wide description is necessary. I beg to move.
§ Lord Clinton-Davis
I merely say that we reserve our position on the matter. At this time of night I am certainly not in a fit condition to absorb much of what the Minister had to say, and I am not sure he absorbed it himself. It was difficult stuff, I think he will agree. We reserve our position.
The Earl of Caithness moved Amendments Nos. 28 to 33:
Page 10, line 12, leave out ("the grantor") and insert:
Page 10, line 15, at end insert:
("(1A) Conditions included in a licence by virtue of subsection (1) (a) above—
Page 10, line 18, leave out paragraph (a) and insert:
("(a) to comply with any requirements from time to time imposed by a qualified person with respect to such matters as are specified in the licence or are of a description so specified;").
Page 10, line 21, leave out ("the Regulator") and insert (''a qualified person").
Page 10, line 24, leave out ("the Regulator") and insert (''a qualified person").
Page 10, line 26, at end insert:
("(d) to refer for approval by a qualified person such things falling to be done under the licence as are specified in the licence or are of a description so specified;
(e) to furnish to a qualified person such documents or other information as he may require for the purpose of exercising any functions conferred or imposed on him under or by virtue of the licence;
(f) to furnish to the Secretary of State or the Regulator such documents or other information as he may require for the purpose of exercising the functions assigned or transferred to him under or by virtue of this Part.
(2A) Conditions included in a licence may contain provision for the conditions to cease to have effect or be modified at such times, in such manner and in such circumstances as may be specified in or determined by or under the conditions; and any provision included by virtue of this subsection in a licence shall have effect in addition to the provision made by this Part with respect to the modification of the conditions of a licence.
(2B) Subsections (1A), (2) and (2A) above are without prejudice to the generality of subsection (1) (a) above.
(2C) Any reference in subsection (2) above to a "qualified person" is a reference to—
so specified, and includes a reference to a person nominated for that purpose by such a person pursuant to the licence.").
§ On Question, amendments agreed to.
§ Clause 9, as amended, agreed to.
The Earl of Caithness moved Amendment No. 34:
After Clause 9, insert the following new clause:
Conditions of licences: activities carried on by virtue of a licence exemption
(" .—(I) If and so long as a person is a licence exempt operator—
(2) A condition which relates to both a licensed activity carried on by a person and a licence exempt activity carried on by him may be included in a licence, but only if and to the extent that, in consequence of his carrying on a mixed activity, the condition must necessarily have effect in relation to the whole, or some part, of so much of the mixed activity as consists of the licence exempt activity if the condition is to have full effect in relation to so much of the mixed activity as consists of the licensed activity.
(3) There shall not be included in a licence any condition relating to the fares that may be charged in respect of train journeys involving licence exempt travel, other than train journeys which also involve—
(4) For the purposes of subsection (3) above and this subsection—
(5) Subsection (3) above has effect notwithstanding anything in subsection (1) or (2) above; and section 9 above is subject to the provisions of this section.
(6) In this section—
§ On Question, amendment agreed to.
Lord Mountevans moved Amendment No. 34A:
Insert the following new clause:
("Requirements as to mutual ticket arrangements between operators of passenger services
.—(1) This section applies in any case where the activities authorised by the licence are or include the provision of services for the carriage of passengers by railway, and references in this section to services are to such services.
(2) Each licence shall include such conditions as the Regulator considers appropriate for the purpose of requiring the licence holder—
(3) In subsection (2) above "relevant ticket" means a ticket of a kind designated by the Regulator for the purposes of this section which entitles the holder to travel from a place within the area where the licence holder issuing the ticket is authorised by the licence to provide services to a destination outside that area.
(4) This section is without prejudice to the generality of section 9 above.").
§ The noble Lord said: This is a probing amendment to explore the future prospects for the use of alternate routes between any two points specified on a given railway ticket. To take an example, I have in mind the journey from Exeter to London. At present it can be made direct via Westbury or via Bristol or via Salisbury. I hope that such options would continue to be available post-franchising and post-open access. Initially I thought that this might be a matter for the franchising director, but my legal advice is that a twin track approach is needed to cover open access.
§ I mentioned the flexibility which exists at present, and I believe that it would be advantageous for it to continue. At the moment, a given fare buys a ticket valid via any reasonable route. British Rail, although broken down into profit centres, runs practically all the trains and I am not aware of any fare competition between the present sectors which may in future become franchises.
§ However, in the future my London-Exeter example is complicated by the following. British Rail may be involved as the residuary operator and/or there may be two franchisees and/or there may be open access operators. The franchise director could, I believe, encourage inter-availability through the franchise agreements. But open access operators are not within his remit and hence I bring the regulator into the discussion. My new clause allows him to specify licence conditions to provide that the operator would accept other parties' tickets (of types specified by the regulator) between any two points as specified on the face of a ticket. Revenue allocation would require a scheme, possibly based on sampling, but it does not seem to me to pose an insurmountable problem.
§ In seeking to protect the passengers' enjoyment of inter-availability, I believe that we are preserving a present good practice and one which many customers would like to see continue. And not only many customers. I am grateful for the support of a number of user and other organisations such as the statutory tourist boards, Age Concern, Help the Aged, CoSLA, the National Council for Inland Transport and the Ramblers' Association. All those bodies subscribe to the aims of Transport 2000 and continued inter-availability is one of that umbrella organisation's 1051 objectives. I shall be interested to hear how my noble friend sees inter-availability developing. I beg to move.
The Earl of Caithness
I am grateful to my noble friend for taking us through his amendment. I have to say that there were various interpretations of it, but I thank him for the clarification that he has given. As he explained, the intention of the amendment is to ensure that passengers should continue to have the flexibility to make choices about their time and route of travel and should not incur undue penalty as a result. This facility is clearly valued by passengers at the moment and the Government expect that in many cases operators will want to negotiate similar arrangements in the future. It is not, of course, universal. Certain tickets, including many discounted fares, carry restrictions as to day or time of travel, or use of particular trains.
It is open to the regulator or the franchising director, under their powers in the Bill, to impose suitable obligations on operators to provide inter-availability, where they consider this appropriate in the public interest. The Government do not intend to impose blanket obligations in this respect. We believe that to do so would be too restrictive. It would tend to blunt competition and, for example, inhibit the development of particular rail services aimed at specific market segments.
We do, however, accept that there will be circumstances—particularly in the case of high frequency commuter flows—where passengers will expect their tickets to be valid for travel on the next available train, regardless of the identity of the operator. That is a reasonable expectation, and—so far as franchised services are concerned—my right honourable friend the Secretary of State intends to give appropriate guidance to the franchising director on such matters, under Clause 5 of the Bill.
It may be that a possible alternative to inter-availability in some cases would be to provide for the passenger to trade in his ticket for one which is valid for travel on a different operator's services. Possible arrangements of that kind are being investigated by the department and its advisers. There are attractions, in that the information obtained at the booking office can then more reliably ensure that revenue is attributed to the operator whose services the passenger has chosen to use for his particular journey.
For all these reasons I do not believe that it would be sensible to be too prescriptive on inter-availability on the face of the Bill. Suitable arrangements will be developed. They will need to vary with different circumstances. There are adequate powers to impose requirements where justified; and revenue allocation arrangements will be able to be put in place as now to ensure that revenue income is routed to appropriate operators.
§ 11 p.m.
§ Lord Mountevans
I am most grateful to my noble friend for that very detailed reply, which obviously requires some further study. With that background, and again expressing my gratitude. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 [Modification by agreement]: [Amendments Nos. 35 and 36 not moved.]
Clause 10 agreed to.
Clause II [Modification references to the Monopolies Commission]:
[Amendment No. 37 not moved.]
Clause 11 agreed to.
Clause 12 [Reports on modification references]:
[Amendment No. 38 not moved.]
Clause 12 agreed to.
Clause 13 [Modification following report]:
[Amendment No. 39 not moved.]
Clause 13 agreed to.
Clause 14 agreed to.
Clause 15 [Facility owners to permit use of railway facilities by other persons]:
Baroness Stedman moved Amendment No. 40:
Page 16, line 26, after ("If") insert ("after consultation with the Central Committee and every consultative committee likely to be affected by the access agreement").
§ The noble Baroness said: In moving Amendment No. 40, with the leave of the Committee I should like to speak to Amendments Nos. 41 and 44. Amendments Nos. 40 and 41 go together as amendments to Clause 15 concerning access agreements. I am seeking to ensure that before giving his approval to an access agreement, the regulator is obliged to consult the statutory body set up by the Bill to represent the rail users. That would ensure that the various consultative committees and the relevant RUCCs would have the opportunity to consider and comment on the terms of any access agreement.
§ The proposed system of access agreements will be an important element in the new regulatory framework for the railways. The access agreements will contain many provisions which will have a direct impact on the passengers who use the service. Such provision will, for example, relate to the timetables or changes in service, to the equipment in use such as the rolling stock and to the establishment of performance monitoring systems. These are all matters on which the CTCC and the RUCCs currently make direct input to British Rail on behalf of rail users. The benefits of those arrangements really ought to be preserved under the new system.
§ Amendment No. 44 to Clause 16 is one where again I am niggling about the vague wording, where the regulator is obliged to publish a notice, again in such a manner as he "considers appropriate", to bring any proposal to grant a facility exemption to the attention of persons likely to be affected by the grant of a facility exemption. Again, there is no specification as to who are the persons likely to be affected.
§ It seems to me that it is the consultative committees from among all the people who ought to receive a copy of the notice. The statutory body set up under the Bill 1053 to represent all the rail users would then have the opportunity to consider and comment on any proposal which the regulator made to grant a facility exemption. It seems to me that it would be wrong for the regulator to be able to grant facility exemptions without being obliged to notify what he was going to do to the new statutory bodies representing the passengers using the railways. I beg to move.
§ Viscount Goschen
We sympathise with the noble Baroness and her wish to strengthen the role of the consumer committees. But we believe that these amendments go too far.
The committees will be looking at the performance of the railway as it affects the passenger. We do not believe that they need to be consulted on drafts of access agreements in order to fulfil that function. Access agreements are essentially contracts between train operators and the owners of facilities such as stations, track and light maintenance depots. They do not directly affect the interests of passengers. In the case of freight operators, access agreements will have no impact at all on passengers, and it would clearly be quite wrong for the committees to become involved in such matters.
Amendment No. 44 would require the regulator to send to the committees copies of notices of his intention to grant an access exemption. Again, we do not feel that that is appropriate. We have already set out our policy on initial exemptions from the access requirements of the Bill. We do not envisage access exemptions granted by the regulator being a frequent occurrence; nor will they necesssarily be limited to passenger services, in which the committees have an interest. Where the regulator thinks that it would be useful to have the views of a consultative committee on a possible access exemption, he will be able to ask it. But we do not believe that a statutory requirement to send the committees a notice of his intention to grant an access exemption is either necessary or desirable.
I therefore ask the noble Baroness whether she will withdraw this group of amendments.
§ Baroness Stedman
I am sorry and disappointed in the reply from the noble Viscount. I had hoped that perhaps the consultative body set up as the statutory body representing the rail users might have a little more confidence placed in it and be specifically named to do the job that it is supposed to do and not leave it to chance that the regulator may or may not consult it. It is a great pity that we have not written into the Bill that the rail users' consultative committees are those who speak for the passengers and those who use the railways.
I shall look into what has been said. For the time being I withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 41 not moved.]
Lord Clinton-Davis moved Amendment No. 42:
Page 16. line 45, at end insert:
("( ) Where the railway facility to which the access agreement relates is a track or station the Regulator shall in
determining whether or not to approve the proposed terms of the agreement have regard to any advice issued to the facility owner by the Secretary of State.").
§ The noble Lord said: In moving this amendment I shall speak also to Amendment No. 43 and shall try to deal briefly with them. It will not be easy, but I am aware of the late hour.
§ The purpose of Amendment No. 42 is to try to probe the policy of the Government regarding the criteria that Railtrack and the regulator will be obliged to take into account in granting access to track and stations. In the first round of the franchising agreement, it seems that agreement would have to be reached between the franchising director and the regulator on the train paths which are needed to provide the services that are to be franchised. In addition, the Secretary of State will advise the regulator to limit the level of competition to allow the franchising to get under way. That is a far cry from the original proposal envisaged by the Government.
§ But what will happen in the later rounds of franchising? I feel that the situation is somewhat obscure. The access document states that Railtrack will be under no obligation to meet the access requirements of the franchising director. On the assumption that the second round of franchising will not start until after December 1996, the Secretary of State will have no power to order the regulator to follow any advice issued to him. That was conceded earlier. As I said at Second Reading, it is extraordinary that Railtrack is not referred to in any of the 185 pages of the Bill; yet it is pivotal in the process that we are discussing.
§ Committee Paper 5, which deals with the draft licence for Railtrack, includes a special condition setting out the way in which Railtrack should undertake its network business. It has to accord with an access regime policy statement. The concept of that statement is extremely important. For example, one can presume that Railtrack could be advised that it should give particular weight to the importance of local commuter services in allocating access to congested mainline stations. The draft licence refers to the access document simply as an example of a statement. But can the paper be said to help in determining the terms of the way in which Railtrack's responsibilities are to be carried out?
§ In my view it is a far too generalised way of dealing with the matter and I should like to ask the Minister specifically: to what extent will the regulator be required, or even allowed, to have regard to the statement when it falls to him to consider the contents of access agreements? There can be no doubt that the allocation of access to track and stations, and the criteria to be taken into account in making such decisions, will be of the utmost importance. The Secretary of State is obliged to give proper policy guidance since it is he who is answerable to Parliament. Surely, the access regime policy statement would be the most appropriate vehicle therefore for the provision of that advice. I should like to know what the Minster's views are on that point. If he agrees with it—I do not think for one moment that he will —what form is the statement to take? What consultation will there be as to its contents? What 1055 parliamentary scrutiny will take place? How will the existence of the statement relate to the role and responsibilities of the regulator?
§ I turn from that to Amendment No. 43, the purpose of which is to highlight the likely effects of the principles on which the Government are proposing that charges for access to the railway network should be based.
One of my concerns is that I do not believe that it can be acceptable for the franchise director to indirectly subsidise open access services. The amendment would ensure that that did not happen. The Minister in another place, Mr. Roger Freeman, sought to argue that it was a sensible course. At col. 1121 of Hansard, he said:
I strongly believe that it is sensible to encourage the running of additional passenger rail services. Where the absence of such services would imply certain costs for the rail network that had to he recovered from the existing services, it is right that those additional services should be offered—as long as they cover their avoidable costs as a minimum. We want Railtrack to try to negotiate the best possible commercial terms, but if the choice is between covering avoidable costs and running, or being denied the ability to offer that service because it is not making a significant contribution to common overheads I know which one I would choose".
Unfortunately, that defence ignores two essential issues. First, the Minister ignored the implications for the competitive position of open access operators and franchisees, and the latter will clearly be at a disadvantage. Secondly, the Minister overlooked the fact t hat the government proposals will mean that any element of subsidy paid to franchisees to cover their track costs will in part cross-subsidise allegedly "commercial" open access operators. That aspect is highlighted by a further statement made by the Minister at col. 1125, when he said,
It is important that the market system works. An open access operator may want to hid to run a train service because it will be profitable: he may want to pay sum X for the right to run, for example, a service into Manchester or a commuter service into London. The franchising director may want to protect that group of trainpaths. He may have to pay more if he judges it socially necessary to preserve that network of services".
§ But under that scenario the franchising director is in an impossible position; he cannot win. He faces the risk of either paying higher levels of subsidy in order to retain a network of services in competition with open access bids or of cross-subsidising open access operators. There is therefore, exemplified by that fact, a clear incompatibility of franchising and open access operations.
§ The issue was addressed by the Commons Transport Committee. Amendment No. 42 seeks to address the anxieties addressed by the committee in its report. I am not sure that it wholly addresses those issues; but it will go some way towards that. I look forward to hearing the Minister's response. I beg to move.
§ 11.15 p.m.
The Earl of Caithness
The noble Lord asked why Railtrack is not mentioned by name on the face of the Bill. Railtrack, when established, will be a government-owned company. The names of the companies are rarely mentioned in legislation. One good reason 1056 for that is that their name may change in future. Railtrack is covered by the expression "network operator" in the Bill. This approach allows us to legislate for all network operators, not just Railtrack. For example, if the Isle of Wight Railway is operated as a vertically integrated franchise, the franchisee will be a network operator as well as a passenger service operator.
Amendment No. 42 is clearly aimed at the terms proposed by Railtrack for access to its facilities. The amendment is attempting to influence the regulator's decisions by the roundabout method of requiring advice given to Railtrack by the Secretary of State to be taken into account by the regulator.
In the short term I do not believe that such a requirement is necessary because the Secretary of State can give guidance direct to the regulator, which, under Clause 4(4), the regulator is required to take into account. This guidance will cover the approach to access charging. In the longer term I do not believe that the requirement is desirable. The provision for guidance to the regulator is intended to cover the launch of the privatisation regime, particularly franchising, but is deliberately limited to the first three years, up to 31st December 1996. Our policy is to establish the regulator as an independent person to take decisions on the appropriate charges, and after the interim period we do not want the Secretary of State to have the opportunity to intervene in these types of decisions. A requirement for the regulator to take into account any advice from the Secretary of State to Railtrack would risk interference with the regulator's independence.
Amendment No. 43 would require the regulator, when considering the proposed terms of access agreements, to ensure that a facility owner did not distinguish in his charges between operators of passenger rail services which are the subject of a franchise agreement and operators of those services which are not. The intention of this amendment is to require charges for track and other facilities not to differentiate between franchised and other passenger services.
The view of the Government, set out in our paper Gaining access to the Railway Network, which was published in February this year, is that the long-term health of the railway industry will best be secured if Railtrack pursues a policy of market pricing, subject to the avoidance of unfair discrimination between competing operators in the same market. The requirements of European law must be satisfied. However, we believe that to adopt any kind of standard tariff approach to charging would price off the network those operators who could afford to make a contribution to costs above the marginal costs they impose on Railtrack, but who could not afford to pay as much as the average cost. The result would be a downward spiral of increased costs pricing off marginal users, leading to an increase in charges for remaining users, and so on.
The regulator will have to consider whether there is any unfair discrimination when he considers the terms of access contracts, including any moderation of competition required for the successful launch of 1057 franchising. While I am happy to accept that the regulator will have an important role in ensuring that the charging system operates fairly, I believe that to impose artificial constraints on the regulator in his approach to this task would be unhelpful.
To answer a specific point raised by the noble Lord, Lord Clinton-Davis, the regulator must take account of any factors that he considers relevant in determining access agreements and must be guided by his duties in Clause 4 of the Bill, including the duty to have regard to guidance issued by the Secretary of State under Clause 4(4) (a) until 31st December 1996. The access policy statement will form part of that guidance.
While we are on the question of access, I should like to clarify the position for the Committee. There are a number of government amendments to go down in relation to this clause. After discussion with the noble Lord, Lord Clinton-Davis, they were not put down as they might well have been starred amendments which we are seeking to avoid. But they will be down for a later stage.
§ Lord Clinton-Davis
I am grateful to the Minister for reading almost as quickly as I was. This is no time to enter into a debate. We have entered into an agreement and we must honour that agreement. We were almost on the brink of it. I shall read very carefully what the Minister had to say but I reserve the right to come back to these issues at a later stage. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 43 not moved.]
Clause 15 agreed to.
Clause 16 [Exemption of railway facilities from section 15]:
[Amendment No. 44 not moved.]
Clause 16 agreed to.
Clauses 17 to 20 agreed to.
§ Viscount Goschen
I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House adjourned at nineteen minutes past eleven o' clock.