Railways Bill (Hansard, 5 July 1993)

The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe)
I hope that I can be of help to the noble Lord. Amendment No. 46C in the name of the noble Lord seeks to ensure that nothing in Clause 22 would prevent BR from providing services under Clause 26; that is to say, where a franchise agreement comes to an end but is not relet. In such circumstances the franchising director would be under a duty to secure the provision of those services until such time as they are again provided under franchise agreement. I can give the noble Lord an immediate assurance on that point. There is nothing in Clause 22 which would prevent the franchising director from entering into a contract with BR to provide those passenger services until a further franchise is let. The franchising director has powers in Clause 44 to enter into contracts with the board to provide passenger services that are not franchised. The amendment is therefore not needed because the Bill already provides for this.
However, it is quite a different matter to require the franchising director to secure the provision of services by BR in the event that he does not award a second or subsequent franchise, as Amendments Nos. 57B and 57C seek to do. He may choose to do so if BR is in a position to provide the services. But in the future when the majority of services have been franchised and are being run by private sector franchisees, BR's capability to provide services will have diminished.
I, of course, take into account this afternoon's proceedings. The decision that the Committee reached today may have a bearing on what BR is capable of doing. In such circumstances the franchising director will want to look to another franchisee to provide the services until a further franchise is let, or he may decide that the best solution is for him to secure the provision of services through his wholly owned company. Even when BR is still running passenger services, the franchising director will want to ensure that he obtains the best value for money in fulfilling his duty to ensure that services are provided until a further franchise is let. It would therefore not make sense to place a requirement in the Bill such as the amendments in the names of the noble Lords, Lord Tordoff and Lord Clinton-Davis, are proposing.
My noble friend has already made clear that BR will continue to run services until they are franchised for the first time. He has also made clear that if the franchising director does not believe that the bids he has received from prospective franchisees represent 1123 value for money and a first franchise is not let, then BR will also continue to provide the services. But I cannot commend to the Committee amendments which would tie the hands of the franchising director in the way proposed. I hope that the noble Lord will be content to withdraw the amendment.

§ Lord Clinton-Davis
I wish to speak to Amendment No. 47ZA which stands in my name. I wish to ask the Minister whether he will consider further a statement that was made by his noble friend in the earlier debate.

§ Lord Tordoff
If the noble Lord will forgive me, I believe that the amendment to which he speaks is connected with Amendment No. 46D, not Amendment No. 46C. Amendments Nos. 57B and 57C are grouped with Amendment No. 46C.

§ Lord Clinton-Davis
That is quite right.

§ Lord Tordoff
I am in difficulty because we are not entirely clear on the long-term impact of what we have already decided. I am sure that the Government Front Bench is in the same position. If I were more sure, I should be anxious to press the matter further. But I believe that we could find ourselves in a position in which BR has been run down to the extent that it will be difficult for it to pick up franchises in the, I think, likely event that some franchisees will fall because of bankruptcy.
The truth is that a number of people who are likely to bid for the franchises may be of no great substance. I have heard reference to certain bus companies wishing to take up franchises. If he were to consider their balance sheets, I hope that the franchising director would feel that they were not necessarily people worthy to obtain a franchise. However, it is possible that people will slip through the net. Assuming that they do. the chances are that there will be bankruptcies. People using local branch lines or rural lines may find themselves in great difficulty. As I understood what the Minister said, in those circumstances at present the franchising director will be enabled to bring BR back into the frame. Is that what the Minister is saying? Alternatively, is he saying that it is possible only where no franchisee has appeared? I am not quite clear on that. Perhaps the noble Earl can assist me.

Earl Howe
I sought to say that BR could indeed be brought back into the frame by way of a contract. If a franchise has not been let, the Bill provides for that. However, like the noble Lord, I am not yet in a position to determine the long-term effects of this afternoon's decision on the Bill and the ability of the franchising director to look further afield in examining tenders.
I cannot be as helpful to the noble Lord as I should like to be. However, I sought to say that the Bill already provides for BR, if necessary, to be brought back into the frame.

§ Lord Tordoff
I am grateful for that explanation. I need to read in detail in Hansard what the noble Earl said. I guess that he, too, needs to read it at some stage. I am sorry to be a little vague at present. It is a difficult situation. I would have pressed the 1124 amendment more firmly had the position been clearer. It is important that we are not in a situation where rural lines, and branch lines in particular, are left hanging because of the failure of a franchisee to fulfil his franchise because of purely commercial considerations.
I know that it is a different situation, but during the past week the catering facilities on the line from Waterloo to Exeter were suspended overnight. Suddenly notices appeared at Waterloo indicating that if you were travelling to Exeter on the Waterloo to Exeter line you could not obtai:n refreshments. Why?—because the franchisee went bust.

§ Lord Mountevans
I am grateful to the noble Lord for giving way. Does he agree with me that the facts that he has outlined with regard to the contractor providing the catering are not the best example of the working of privatisation?

§ Lord Tordoff
I am most grateful to the noble Lord. I am sure that his Front Bench will not hold it against him and take the Whip away from him, or anything like that. I shall not go down that philosophical route. However, the truth is that that indicates that franchisees can fall very abruptly. It is difficult enough for people who are travelling from Waterloo to Exeter if they cannot get a cup of coffee and a sandwich or all the good things that are provided by the catering services on British Rail. It is bad enough in that case, but how much worse for someone who wants to go home on a branch line from Exeter to deepest Devon if he suddenly finds that overnight the franchise for the very line itself has collapsed.
We need a fallback position and that is why I tabled the amendment. I hope that the assurances that have been given can be sustained by the Minister because many people will be upset if they do not have a service.

Earl Howe
Perhaps I may be of further help to the noble Lord. The franchising director will be required to examine the financial standing and managerial competence of prospective franchisees before issuing an invitation to tender. There is no question of any services being discontinued if a franchise falls in. The franchising director at all times will be under a duty to secure the continued provision of services on a particular line.

§ Lord Clinton-Davis
With respect to the Minister, it is completely impractical to take that view. Let us assume, as the noble Lord, Lord Tordoff, said, that a franchisee obtains a franchise. He then finds that the situation is completely untenable for economic reasons. With the best will in the world, he cannot continue to operate the franchise. Then the franchising director says, "I am sorry, you've got to do it, otherwise I shall prosecute you". The franchisee will say, "You can prosecute as much as you like. I have a reasonable excuse and I am not afraid". Then the franchising director will say, "I shall serve you with the appropriate notice". What good does that do? How does the franchising director ensure that there is no gap in the service that is provided? In my submission, certainly in a number of cases he cannot do it.

Lord Tordzoff
I endorse what the noble Lord, Lord Clinton-Davis, said. The fact is that if someone is put in a position where they may be trading while bankrupt, they must cease services immediately. Unless the franchising director has some fallback and some other organisation which can take over the franchise immediately, that line will suffer. The purpose of the amendment is to make sure that British Rail is there, in post, in order to fulfil that need.
However, clearly we shall not come to a conclusion tonight. I am grateful to the Minister for such help as he has been able to give but I am sure that we shall need to come back to this at a later stage. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.

§ Viscount Goschen
I beg to move that the House do now resume. In moving this Motion, I suggest that the Committee stage begin again not before 8 o'clock.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.