HL Deb 05 July 1993 vol 547 cc1145-96

8.26 p.m.

Viscount Goschen

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Viscount Goschen.)

Lord Clinton-Davis

My Lords, on that Motion, I wonder whether the Minister has had an opportunity to analyse the effects of the vote which was taken shortly before the dinner break on any other clauses and amendments which we may be due to consider this evening.

The Earl of Caithness

My Lords, the situation is as I described it immediately after the vote. We shall proceed with the Committee stage, taking the amendments as they come. We shall see how it goes. The Bill is amended by your Lordships and we shall proceed with the other amendments.

On Question, Motion agreed to.

House again in Committee on Clause 22.

Clause 22, as amended, agreed to.

Clause 23 [Invitations to tender for franchises]:

Lord Clinton-Davis moved Amendment No. 46D: Page 25, line 2, after ("shall") insert ("subject to subsection (3A) below").

The noble Lord said: In moving this amendment I shall speak also to Amendment No. 47ZA. The purpose of the amendments is to impose on the franchising director duties in relation to the invitation of bids for franchises, the selection of the successful franchisee and the publication of the reasons for his choice.

The Bill as it is drafted is extremely imprecise. It gives very little detail as regards the requirements which the franchising director is expected to follow in pursuing the franchising process. In Clause 23 the regulator is required to be consulted on the list of people to whom the invitation to tender should be sent. I find that rather odd. As I understand it, according to the Minister the franchising director determines to whom the invitations are to be issued. Does that have the effect in practice of excluding others who wish to tender, other than those who happen to meet with the support of the regulator and the franchising director? In other words, is that exclusive to them?

In any event, if it is open to others, is not the position prejudged because the franchising director, in consultation with the regulator, would have made a determination in his own mind as to who is suitable in advance of the consideration of others?

Then again, if that process is to be followed—and this is a point to which I referred the Minister privately and gave him notice that I should raise the matter—does that not offend Article 85 of the competition articles of the treaty? What is happening is that the franchising director and the regulator are making a judgment in advance. It could well be that undertakings—not only from outside the United Kingdom but also within it—could claim that they are not being given a proper opportunity to tender and that proper consideration has not been given to their tender. Consequently, that is a distortion of competition within the rules.

The provisions of Clause 23 represent a marked contrast with those of the Transport Act 1985, because that imposes considerable constraints on the way in which local authorities are expected to carry out the tendering process for subsidised bus services. Consequently, the amendments which are now put forward are based very much on the tendering provisions of the 1985 Act.

In terms of inviting bids, the amendments require the franchising director to bring an invitation to tender to the attention of interested parties and to send it individually to anyone who has requested such an invitation. The amendments would require the franchising director to base his choice of franchisee on, the most effective and economic application of the funds". They would also require him to publish information on the tenders submitted and his reason for accepting the successful bid.

It is quite clear—indeed, there is no question about it —that under the Government's proposals the franchising system is of crucial importance. It will be of importance financially for rail operators, PTAs and of course the Government. In terms of policy it will be a determining influence on the shape and quality of rail services. Therefore, it follows that it is essential that it should be carried out in a properly regulated and transparent way. I simply do not believe that the Bill as drafted provides for that. The amendments would fill in the gaps.

When dealing with subsection (2)—I have dealt with the principle here—the provision states: The Franchising Director shall prepare any such invitation … and shall issue that invitation to such persons as he may, after consultation with the Regulator, think fit". What criteria will they apply? Moreover, does that really represent a proper way of proceeding, or even of complying with the Government's intentions in that regard?

Under subsection (3) the franchisee has to be in "an appropriate financial position" and to have "managerial competence". But how that is judged is open to doubt. For example, is it "managerial competence" in the operation of railways? Alternatively, is it just managerial competence? Further, what about the term "a suitable person" used in respect of the franchisee? What does that mean? Is it the sort of fit-and-proper-person procedure that is applied in relation to insurance legislation and regulations? Who is a suitable person? I do not think that we are helped either by what is in the Bill or what is in the Notes on Clauses which the Minister very kindly provided. I invite the Minister to respond to those points. I beg to move.

8.30 p.m.

The Earl of Caithness

I believe that the issues raised by the noble Lord, Lord Clinton-Davis, in moving the amendment show that there is little, if anything, between him and the Government. However, as I shall explain, I do not believe that it is necessary for us to accept the amendment in order to achieve the noble Lord's aims.

The first subsection of the noble Lord's amendment would require the franchising director to issue invitations to tender in a manner which he considers appropriate for bringing the competition to the attention of persons who may be interested, and in particular to all persons who have signified to him in writing that they wish to receive the invitation. The franchising director will be keen to attract the maximum response to franchise competitions. He will know, as do we, that the way to get good bids that reflect good value for money for the taxpayer is to have effective competition. I do not believe that we need to put the franchising director under a statutory duty in that regard. In so far as we want to guide the tendering process, we can do so through the objectives and guidance which the Secretary of State will set for the franchising director.

There is another important point here. We envisage franchise competitions being held broadly in three stages—pre-qualification, formal tender and negotiation and award. Members of the Committee will be aware that it is common practice to employ such a process to whittle down the number of prospective tenderers for a contract to a manageable number. in pre-qualification, prospective bidders are provided with an information memorandum sufficiently detailed for them to crystallise their interest, and those assessing pre-qualification returns are able to assess the weight and strengths of all the bidders across a range of areas: for example, have they the financial standing, management experience and resources to be serious players?

The process makes sense for those judging the competition and for the bidders because submitting a detailed tender is a time-consuming and expensive business. If one stands little chance of winning, it is better to know on the first cut. It also ensures that all prospective bidders have the opportunity to register their interest. A statutory duty phrased as in the noble Lord's amendment would not admit of that first pre-qualification stage.

Next there is the question of how the franchising director shall decide the outcome of a franchise competition. The noble Lord's amendment suggests that his grounds should be the most effective and economic application of the funds at his disposal for the payment of grant. I hope none of us would quibble with the proposal that they should be the grounds on which a franchise should be awarded. But I would draw the noble Lord's attention to the general duty in Clause 5 which already addresses the point. Although the duty in Clause 5 is framed in terms of the payments he makes, the duty clearly covers the agreements that the franchising director enters into, as they will dictate the payments he makes. We must ensure that the competition process is in accordance with EC rules.. I take the point that the noble Lord made on that issue. As I said before—and will doubtless say again—it is important that we should comply with EC rules.

The noble Lord also suggests that the franchising director should be under a duty to consult with the regulator before making an award. He may wish to do so; he may need to do so. Certainly in assessing the other passenger railway services on offer the franchising director will need to consult a number of people, including Railtrack. But I do not see any need for him to be under a statutory duty to consult the regulator, who will not be in a position to advise on what must be a careful judgment by the franchising director of the needs of passengers for railway services in the light of the budgetary resources available to him.

Finally, we come to the provisions in the amendment dealing with the provision of information by the franchising director. Perhaps I may address the, noble Lord's concerns more generally. Under the provisions of Clauses 65 and 67, the franchising director will be required to keep a register and publish an annual report. The franchising director's progress in granting franchises and holding competitions will be covered in public reports, and, indeed, the provisions of the franchise agreements he enters into will, subject to the necessary protection afforded by Clause 65(4), be open to public scrutiny as part of the franchising director's register. I am sure that Members of the Committee will understand that no tender competition can ever be held wholly in the public domain. Matters must be considered and discussed which are commercially confidential to those concerned.

Let us consider the possibility of a franchise being awarded to company A on the grounds that company B had bid on the basis of an innovative idea which the franchising director did not consider appropriate to the franchise in question but which would be applicable elsewhere. Should he be obliged to publish his reasons and thus reveal the proposal which might otherwise have stood company B in good stead for winning a future competition? I think not.

The noble Lord is concerned that, in awarding franchises, the franchising director must act in a responsible manner, as must any public body charged with spending money on behalf of the taxpayer. That is why the actions of public bodies, including the franchising director, are subject to investigation by the NAO and the PAC. I hope that I have reassured the noble Lord on the points that he raised.

Lord Clinton-Davis

I thank the Minister for his very full reply. I thank him in particular for his agreement that the provision must accord with European Community obligations. However, the question is, does it? I hope that the Minister will have an opportunity to return to the matter on a later occasion, but not tonight, when we may wish to raise such issues. Indeed, I give him notice that there are other matters in relation to other clauses that I may wish to raise in that context.

However, I feel that the vagueness of the criteria could lead to major problems and, indeed, even to judicial review, especially over the phrase "a suitable person". But, having said that, I shall read the Minister's response carefully and reserve the right to return to the matter. I believe the Minister and I are very much in accord about the principles involved. It is therefore a matter of whether he or I have got it right; or, alternatively, whether there is room for compromise between the two of us as regards the way in which we have dealt with the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Stedman moved Amendment No. 47: Page 25, line 3, at end insert: ("( ) Before issuing any invitation to tender, the Franchising Director shall consult the Central Committee and every consultative committee likely to be affected by the proposed franchise agreement regarding the terms and conditions to be included in the draft franchise contract to which the invitation to tender relates.").

The noble Baroness said: We have now arrived at the point at which we finished late on Thursday evening when we were discussing consultative committees and how far they will be consulted. Amendment No. 47 tries to ensure that, before issuing an invitation to tender for a franchise, the franchising director is obliged to consult the statutory bodies which have been set up under the Bill to represent rail users about the terms and conditions that are to be included in the draft franchise contract.

The proposed franchising system is an important element of this Bill and the new regulatory framework for the railways. The provisions of the franchise agreements will have a direct impact on passengers, such as, for example, the minimum service specifications, the quality of service, the changes to service, the fares, the assets and any liabilities to passengers. Indeed, under Clause 69(8) consultative committees can be ordered by the franchising director to investigate whether a franchise operator is meeting the standards set for the provision of the services.

Surely therefore it must be right that, before issuing any invitation to tender, the franchising director should consult the statutory bodies which have been set up under the Bill to represent rail users on the terms and conditions of the draft franchise contract. After the response we received on Thursday I am not hopeful of getting anything much more favourable tonight. However, I am always ready to be surprised. Can the Minister tell us at this stage what directions will be given to the franchising director? Will any direction be given to him on how he should work with the consultative committees? Will there be a code of practice as to whom he should consult and when; and if that kind of document is to be produced, will it be possible for Members of this Chamber to see a copy of it before the Bill leaves us? I beg to move.

Lord Tordoff

I believe that it is the intention that we should discuss with this amendment Amendments Nos. 57D and 57F. The first amendment stands in my name and the second in the name of the noble Lord, Lord Teviot. First of all, I entirely support what the noble Baroness has said. The franchising director needs to have as much information and guidance as he can possibly get in enabling him to reach the decisions he must reach in a difficult situation. Certainly the consultative committees are important in that respect.

I wish to refer briefly to Amendment No. 57D. In those cases where a service has fallen in, it is important that the franchising director should not unilaterally decide whether a franchised service should be replaced. It would be a great temptation to say, "It has fallen in and therefore it is not needed". But in terms of the community in the area and the network as a whole it is important that the franchising director should seek information as widely as he can. Clearly where there is the possibility of an open access operator providing a parallel service it might still be necessary for a franchised service to be replaced. At the very least it is necessary for the consultative committees to be consulted before the franchising director reaches his conclusion. That is what Amendment No. 57D is intended to provide.

8.45 p.m.

Lord Teviot

At last this amendment has arisen. It has been put into a siding on this Railways Bill, if a siding existed. As it has been delayed, passengers could have consulted the Passenger's Charter and demanded free drinks at the bar. However, I shall leave that aside as I intend to make my serious speech on Amendment No. 57F.

As has been mentioned by the noble Baroness, Lady Stedman, and the noble Lord, Lord Tordoff, franchising is at the heart of the proposed transfer of rail operations to the private sector. As has been widely recognised, the present method of privatisation is quite different from earlier ones. This means that the real instrument of privatisation is not the Railways Bill itself but the individual franchise agreements to be entered into between the franchising director and the rail operators, to be known as franchisees. I do not know what our school masters would make of the word "franchisees". I understand it is expected that there will be around 30 of these agreements. This is perhaps a modest number when one is told that there will eventually be many thousands of different agreements under the new system, but the franchise agreements are certainly the most important and likely to provide the most work for lawyers and officials.

Some safeguards in the franchise agreements will be required under the Bill but the vast bulk of the clauses will be open to negotiation, including the services to be franchised, the minimum service required to be run, the investment to be made and the sum of money to be paid by the franchisee or, more probably, to be received by the franchisee by way of grant.

The purpose of my amendment is to ensure consultation by the franchising director before an agreement is entered into. I believe the Government accept the principle of consultation but I consider it essential for the Bill itself to provide for it. That is what I am putting forward. The organisations to be consulted are the rail users' consultative committees in the areas where the franchised services would run. The amendment would require consultation through the central committee, which will then refer the proposed franchise agreement to the relevant local committee. The local committee will then involve rail user groups in its area. The function of the latter is extremely important. The rail user groups now play a significant and constructive role in representing the interests of passengers in their area and at present work closely with British Ran. I understand that there are now over 200 such groups in the country, three of whom were invited to give evidence to the Transport Select Committee. These groups, who are well respected in their areas, are the Cotswold Line Promotion Group, the Friends of the Settle-Carlisle Line and the Southend Rail Travellers Association. The Committee will appreciate that those are varied groups from different parts of the country.

The object of consultation is to enable the franchising director to obtain the views of those most directly interested in the franchised service. I recognise that the ultimate decision must rest with the franchising director but I consider it right to ask him to be satisfied in his own mind that when he grants a franchise this will be beneficial for rail users.

There is considerable concern that prospective franchisees will not have adequate financial or technical resources or may not be prepared to provide a comprehensive service. The process of consultation will enable the franchising director to be aware of local needs and local opinion. The only problem I can see is that the franchising process must not be unduly prolonged. The amendment I am putting forward therefore proposes a strict time limit for the consultation period.

Viscount Goschen

Amendment No. 47 would require the relevant committees to be consulted on the terms and conditions of a proposed franchise contract before invitations to tender for a particular franchise are invited. While we accept the spirit of this amendment, we do not think it is necessary to make this a statutory requirement. We have already given a commitment that the franchising director will consult rail user groups, in particular the RUCCs. The franchising director will be able, through these consultations, to assess passengers' requirements. I can assure the noble Baroness, Lady Stedman, that the instructions and guidance which the Secretary of State will give to the franchising director will cover the need to consult the consultative committees and others before awarding a franchise.

Amendment No. 57F covers similar ground but gives the consultative committees a much greater role by way of commenting on a proposed franchise agreement. We sympathise with the thinking behind this amendment as expressed by my noble friend Lord Teviot but again I cannot accept it. As I said, the franchising director will be able to consult the consultative committees and other interested rail-user groups. The mechanism for doing so can be left to the franchising director; for instance, it may not always be necessary to consult via the central committee.

The franchising director will of course take into account the views that he has solicited from the committees and other groups. We do not believe that this need be put on the face of the Bill. Equally. the franchising director will not award a franchise if he thinks that that will not be in the interests of the passengers using those services. While we are very keen to see the private sector provide franchised services, it is not a question of franchise at any price. If the franchising director believes that BR will provide a better quality of service than a franchisee, taking into account value for money, he will not award the franchise agreement.

Amendment No. 57D would give the consultative committees a role in deciding whether the franchising director should secure the provision of services in the event that a franchise agreement comes to an end, or is terminated, and no further agreement has been entered into. I can assure Members of the Committee that the relevant provision—Clause 26(2) (a)—has no sinister intent. It simply recognises the possibility that as "open access" passenger operators enter the industry it may become unnecessary for the franchising director to secure the provision of certain services because adequate alternative services—provided by non-franchise operators—already exist. It is worth adding that the franchising director's judgment. of what constitutes adequate alternative provision of railway passenger services can be subject to judicial review should anyone believe that he is using this provision to avoid his legitimate duty.

In the light of that explanation I ask the noble Baroness to withdraw her amendment.

Lord Tordoff

Before the noble Baroness decides what to do with the amendment I must say that judicial review is using a steamhammer to crack a nut. The idea that that should be the only recourse is a little bizarre.

The Minister suggested that certain points of guidance would be drawn hp for the franchising director. Is there a possibility of those being put on the record before the Bill passes through the rest of its stages? That would be of great help. One does not want to put provisions on to the face of Bill which are totally unnecessary. However, if there is to be guidance by which the franchising director is intended to operate—and I hope that that information is passing rapidly to the Government Front Bench—it would be most helpful if Members of the Committee could see those guidelines before we reach the final stage.

Viscount Goschen

I thank the noble Lord, Lord Tordoff, for those remarks. Obviously, judicial review is for use in the ultimate eventuality. We consider that this is a decision for the franchising director. The objectives and guidance issued to the franchising director by the Secretary of State will cover his liaison with the statutory consumer committees. A draft is in the Library.

Lord Ewing of Kirkford

The noble Earl, Lord Caithness, has today circulated a letter which states that it is the Government's intention to table amendments at a later stage of the Bill to extend the role of the consultative committees and also to accept one or two amendments on the Marshalled List in the name of the noble Baroness, Lady Stedman. Surely the Government's position is clearer than has been explained and goes some way towards meeting the point outlined by the noble Lord, Lord Tordoff. On a quick perusal the letter appears to be most helpful. It would be even more helpful if at this stage we could have on the record that it is the Government's intention to table amendments to strengthen the role of the consultative committees as regards the relationship between the franchising director and those committees.

Lord Tordoff

Before the Minister responds perhaps I may point out that the letter from the noble Earl was pushed into my hand as I was about to stand up and speak to the amendment. Clearly, I have not had time to digest its contents but if it is an answer to my question I am grateful.

Viscount Goschen

The letter was for information only. I have indicated the Government's present position and the letter relates to tabled amendments with which we shall deal later.

Baroness Stedman

I too am grateful for the letter which I have not had time to read and digest. However, I notice that the Minister is prepared to accept some of my amendments. In the light of that and the Minister's explanation—

Lord Clinton-Davis

Before the noble Baroness withdraws the amendment, a specific point was made by the noble Lord, Lord Tordoff, inviting the Government to ensure that the guidance would be available for consideration by this Committee at a later stage. I detected that the Government were about to say "Yes" to that, but I do not believe that they did.

Viscount Goschen

I thought that I had mentioned that a draft copy had been placed in the Library.

Baroness Stedman

In the light of the Minister's comments and the letter, which looks as though it will be helpful, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 47ZA not moved.]

Clause 23 agreed to.

Clause 24 [Transfer of franchise assets and shares]:

The Earl of Caithness moved Amendment No. 47A: Page 25, line 42, at end insert: ("( ) In England and Wales, no execution or other legal process may be commenced or continued, and no distress may be levied, against any property which is, or rights which are, franchise assets in the case of any franchise agreement.").

The noble Earl said: In speaking to Amendment No. 47A, I shall speak also to Amendment No. 47B. Their purpose is to prevent property or rights which are designated as franchise assets under the provisions of this clause being seized by judgment creditors. Franchise assets will be those items—property, rights and liabilities—essential to the continued provision of a particular service. The intention is that, by designating them, the franchising director can protect their availability and provide for their smooth transfer from one franchisee to the next. Amendment No. 47A deals with the position in England and Wales and Amendment No. 47B provides the equivalent provision for Scotland.

Clause 24 is framed in terms of assets being designated at the commencement of a franchise within the franchise agreement or during the life of the franchise either in accordance with the provisions for so doing in the franchise agreement or by amendment to the franchise agreement. The list of assets so designated will be publicly available as part of the franchise agreement. A franchisee's creditors will therefore be able to check what if any property has been designated and will therefore be protected from seizure.

Continuity of service is a theme running throughout our proposals. The protection provided by these amendments is a further example of this and we believe that it is necessary in order to safeguard the uninterrupted operation of passenger rail services. I commend the amendments to the Committee. I beg to move.

Lord Tordoff

It would be churlish not to say that we are grateful to the Government for taking account of the problems which we identified. Whether the amendment deals with the point is beyond my competence to say but I believe the intention is right.

On Question, amendment agreed to.

9 p.m.

The Earl of Caithness moved Amendment No. 47B: Page 25, line 42, at end insert: ("( ) In Scotland, no diligence or other legal process may be carried out or continued against any property which is, or rights which are, franchise assets in the case of any franchise agreement.").

On Question, amendment agreed to.

Clause 24, as amended, agreed to.

The Earl of Caithness moved Amendment No. 48: After Clause 24, insert the following new clause: Fares and approved discount fare schemes (".—(1) A franchise agreement may include provision with respect to the fares to be charged for travel by means of the franchised services. (2) Subject to the other provisions of this Act, if it appears to the Franchising Director that the interests of persons who use, or who are likely to use, franchised services so require, he shall ensure that the franchise agreement in question contains any such provision as he may consider necessary for the purpose of securing that any fares, or any fares of a class or description, which are to be charged are, in his opinion, reasonable in all the circumstances of the case. (3) Every franchise agreement shall include provision requiring the franchise operator—

  1. (a) to participate in every approved discount fare scheme,
  2. (b) to charge fares, in cases to which such a scheme applies, at rates which are not in excess of the levels or, as the case may be, the maximum levels set by the scheme, and
  3. (c) otherwise to comply with the requirements of every such scheme,
if and to the extent that the franchised services are services, or services of a class or description, in relation to which the approved discount fare scheme in question applies. (4) The discount fare schemes which are to be regarded for 1 he purposes of this section as "approved" are those which are from time to time approved for the purposes of this section by the Franchising Director. (5) In this section— discount fare scheme" means any scheme for enabling persons who are young, elderly or disabled to travel by railway at discounted fares, subject to compliance with such conditions (if any) as may be imposed by or under the scheme; discounted fare" means a lower fare than the standard fare for the journey in question; scheme" includes any agreement or arrangements.").

On Question, amendment agreed to.

[Amendments Nos. 48A and 48B, as amendments to Amendment No. 48, not moved.]

Lord Carmichael of Kelvingrove moved Amendment No. 48C: After Clause 24, insert the following new clause: ("Passenger Transport Executive past investment in rail infrastructure .—(1) Where a franchise asset, railway facility or item of rolling stock which has been the subject of investment by a PTE pursuant to an agreement made under Section 20 of the Transport Act 1968 or otherwise pursuant to its statutory functions is made the subject of a licence, facility agreement, access agreement or franchise agreement under this Part of the Act, then the Rail Regulator, Franchising Director and Secretary of State shall be under a duty in exercising their functions to take full account of such investment and ensure that the value of such investment is fully recognised in the terms of any such licence or agreement as aforesaid whether by an appropriate capital payment to the relevant PTA or PIE, cancellation of any outstanding liability on the part of the PTA or PTE in relation to it, or by provision of a proportionate share in any revenue accruing to the Rail Regulator, Franchising Director or Secretary of State, as shall be agreed with the PTE. (2) In default of such agreement the matter shall be referred for decision to an arbitrator appointed by the President of the Law Society.").

The noble Lord said: This is an important amendment. It raises a fundamental issue concerning the investment by the PTAs in rail infrastructure, which in the past 15 years has amounted to over £600 million. That investment has been made either by underwriting the costs incurred by British Rail in servicing the capital debt on its capital expenditure or by making a direct grant to British Rail.

Under one of the proposals in the Bill most of the assets involved would pass either to Railtrack or one of the rolling stock meeting companies. However, in respect of assets which have been funded by a direct grant to British Rail, the PTA would continue to be responsible for paying the debt charges associated with that expenditure, which, of course, it would be quite happy to do if it still has control of the assets for the purpose of its passengers.

It is therefore essential that the passenger transport authority is not faced with a situation in which it is paying twice for the assets: that is, first through its own debt charges and, secondly, through charges which its franchisee would pay either to Railtra.ck or the rolling stock company as appropriate for the use of the assets.

The purpose of the amendment is therefore to ensure that duties are placed upon the regulator, the franchising director and the Secretary of State to ensure that when such assets are being used the expenditure incurred by the PTA is fully recognised either by taking over the liability or compensating the authority for the costs that it will continue to incur by having a lower charge for the use of the assets.

Again, this matter has been the subject of debate between officials of the department and the Association of Metropolitan Authorities. At this stage of the Bill, the important: factor is to ensure that in his response the Minister gives us some indication that he will be in favour of the amendment, even if he has to bring the provision back at a later stage. We should like to know what action he will take. I beg to move.

Lord Mountevans

I have some sympathy with the amendment which I take to be probing. I should like to widen the issue a little because although the amendment refers specifically to railway facilities—I take them to mean Railtrack items or rolling stock —and PTEs, we also have to remember that the county and district councils have some interest in the matter.

Not so long ago in this Chamber I moved a British Rail Bill. I can remember explaining to those noble Lords who were present that while the Bill was promoted by British Rail certain of the items were promoted by, for example, the West Yorkshire PTE or the Merseyside PTE. There are a number of other bodies that one can think of.

Perhaps one may consider some of the big projects going on at present. One knows that on infrastructure matters—for example, the Birmingham cross-city project—West Midlands PTE is investing some £40 million in infrastructure. In Liverpool, the Merseyside PTE is investing £33 million in a new signal control centre which relates not only to the tracks on which PTE-sponsored trains run but also to InterCity and Regional Railways service tracks.

There are other examples. However, perhaps one may consider rolling stock. We have the Leeds North-West scheme which was also covered by the Bill that I moved, although the sponsoring organisation then was in fact my noble friend's department. In that case, we have both an infrastructure and, hopefully, a rolling stock lease. We have Tyne and Wear PTE buying Pacers in the past, and Centro buying stock for the cross-city electrification, to which I have already referred. We have South Glamorgan County Council buying stock for its own venture with British Rail to reopen the Maesteg branch.

I should like to widen the discussion a little to the counties. The counties have also invested considerably. At Second Reading my noble friend referred to what is called the Robin Hood line, running out of Nottingham, on which some £6 million, split variously between infrastructure and rolling stock, has been invested by Nottinghamshire County Council and Derbyshire County Council. Close to my own heart is a little station in Somerset called Templecombe which was closed by Dr. Beeching and reopened, quite literally by community support, 10 years ago this October. However, although the community raised a lot of the money, and Network SouthEast put forward some of it, a considerable amount of money came from Somerset County Council and from South Somerset District Council.

When such people have invested in rolling stock which will go to the leasing organisations, or in infrastructure, they feel to a certain extent that they are threatened with double jeopardy if they do not receive due credit. Let us take the Merseyside PTE-sponsored signal centre which will cost £33 million. The Merseyside PTE will eventually be paying off the capital charges. Meanwhile, it will be paying off the interest out of the PTE budget.

My noble friend Lord Carmichael stated simply that it is an important amendment. I tend to treat it as a probing amendment. I believe that some reassurances are called for here to make sure exactly what is the position in respect of the investments which have been made by the PTEs. I look forward very much to my noble friend's answer.

The Earl of Caithness

The PTAs and PTEs have done a great deal to promote the use of rail in their areas. They have supported investment in the railway network, in trains, in stations and in other track-related facilities, such as electrification. We welcome the work they have done in the past, and we want them to carry on that good work in the future. The noble Lord, Lord Carmichael, is rightly concerned to see that the PTAs' and PTEs' interests in investment, which they have supported through payments made under their Section 20 agreements with BR, are given due regard in the context of our privatisation proposals.

My right honourable friend the Minister of State for Public Transport has been in discussion with the AMA and the PTA chairmen about the treatment of past PTA/PTE investment and a further meeting is being arranged later this month. We are working on proposals which would meet the following principles: first, that the PTEs' interests in investment should be recognised so that the PTEs are not charged twice for assets whose purchase they have funded, that the continued use of investment for its intended purpose is ensured, that the PTEs have some say in the use of assets they have funded, and that the PTEs share in any development gain accruing to assets which they have funded in accordance with the existing agreement on development gain they have with BR; secondly, that there should be no hiatus in the provision of services; and, thirdly, that treatment of the PTEs should not make the access charging system more complex than need be.

I am pleased to say, and I hope that the noble Lord, Lord Carmichael, will agree with me, that the discussions so far have been carried out in a constructive spirit, with both sides determined to take a sensible and pragmatic approach. In that spirit I am confident that a satisfactory outcome can be achieved. Of course, we shall be able to update Members of the Committee at a later stage. I may say to my noble friend Lord Mountevans that much the same considerations apply to investment undertaken by other local authorities. We intend to take the same sensible, equitable and pragmatic approach to them too. I hope that both my noble friend Lord Mountevans and the noble Lord, Lord Carmichael, will bear with us for a little longer while the discussions continue.

Lord Carmichael of Kelvingrove

I am grateful to the noble Earl for that explanation. The contribution of the noble Lord, Lord Mountevans, was most valuable in adding to what I said. I am sure that if the PTAs are satisfied with the arrangements made with the Government, we shall be happy too. The Minister said that we would have information fairly soon. He is meeting the chairmen of the PTEs next week, I understand, and following that he will put the papers before us. Therefore, I am grateful for the help he has given and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 25 [Other terms and conditions of franchise agreements]:

Lord Carmichael of Kelvingrove moved Amendment No. 48D: Page 27, line 15, at end insert: ("( ) The Franchise Director shall not enter into a franchise agreement requiring him to pay any grant or make any other payment to a train operator unless he is satisfied that the level of grant or payment is less than would have been required had the Board continued to provide the railway passenger service.").

The noble Lord said: This amendment seems to me to be absolutely self-evident. The franchising director will make sure that any franchise into which he enters will be at a better level, from the public's point of view and that of the public purse, than he could have obtained from British Rail.

The franchising director will have all the facts about British Rail's costs over the years which will be historic facts after 10 or 15 years' experience of those costs. Therefore, presumably, he will be able to make a good judgment as to whether the applicant for the franchise is giving the public a better deal than the historic deal given by British Rail to the public. I shall be interested to hear the Minister's reply. I beg to move.

Lord Renton

Although the purpose behind the amendment is sound and it raises quite a good principle, I could imagine there being exceptions to it. One exception occurs to my mind at once, the only one so far. There may be a section of British Rail, an outlying branch or two, in a remote spot, which British Rail wished to apply to close. The franchising director may say, "I do not think we need let British Rail close it down because I could find someone who would purchase the franchise, provided he received an adequate grant". In those circumstances, the public could be deprived altogether of a service. But if a larger grant than had been received by British Rail were being paid, then the line could be kept going for the public. That is just an exception that occurs to me, and one that I believe should be borne in mind.

9.15 p.m.

The Earl of Caithness

I am glad to know that the noble Lord, Lord Carmichael, is just as, concerned about value for money as I am. Any fear that the franchising director may be tempted to ignore BR's performance when judging bids from prospective franchisees, I cart assure him, is entirely misplaced. We have made it clear that the franchising director will take the cost of BR continuing to provide a service fully into account when considering the bids of prospective franchisees. We discussed that at some length on the first amendment today. As I explained then, BR will be running each of the groups of services to be franchised in a shadow franchise. The information generated by shadow running will help the franchising director to assess how much it would cost if BR continued to run the services. The franchising director will, however, be looking at BR's overall track record when considering the performance of a shadow franchise, rather than at a bid underwritten by the taxpayer.

We have no desire to spend taxpayers' money if there is no benefit to be won. I am sure that every Member of the Committee is well aware of the powers of the Public Accounts Committee and the National Audit Off.-e. The franchising director will certainly be aware that he may be called before the PAC or investigated by the NAO if he is thought to be spending public money in a way which is wasteful. If the franchising director does not believe that any of the bids he has received represent good value for money, he will not grant a franchise and BR will continue to run the service. Again, that is what I said earlier.

Securing value for money is not just about finding the cheapest operator to provide services. It is also about the quality of service on offer to the passenger and it is about transferring risk from the taxpayer wherever possible. The franchising director will need to take all these factors into account. I believe it is wrong to suggest that the franchising director cannot award a franchise to a private sector bidder unless it is going to cost less than it would cost BR to continue running the services.

I am grateful for what my noble friend Lord Renton had to say on the amendment and for the example that he gave that came readily to his mind where the franchising director needs to consider all the factors involved in providing a service. Nothing that we discussed earlier, or the amendment to which the Committee agreed, affects the comments that I have made on this amendment.

Lord Carmichael of Kelvingrove

Again, I am most grateful to the Minister for his very full reply. I am also grateful to the noble Lord who raised the question of the branch line. It is not surprising to those of us who knew him—sharp in these ways as the noble Lord was—in the Commons that he picked on the point. It is one that I had personally not thought of. However, the Minister's reply went a long way towards solving even that very interesting point.

The Minister gave a long reply. It was enough to satisfy me that the Minister has recognised that I am as Scots as he is, and as anxious as he is to save money. Therefore I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Caithness moved Amendment No. 49: Page 27, line 28, leave out subsection (4).

On Question, amendment agreed to.

Lord Rix had given notice of his intention to move Amendment No. 50: Page 27, line 29, at end insert: ("( ) The Franchising Director shall secure t he continuation of existing provision for discount schemes for disabled people and those accompanying such people subject to such improvements as shall from time to time be negotiated.").

The noble Lord said: This matter was referred to in the debate last Thursday. The amendment seeks to assure those in possession of a disabled person's Railcard that the value of the card will be at least retained at the current level, subject to such improvements as shall be negotiated from time to time, and that the scheme shall also permit, as currently, a person accompanying a disabled rail passenger to travel at the same concessionary fare as the disabled person. Otherwise, yet another extra cost of disability will be faced by those already in far too many cases on low incomes.

I would welcome, as would the Disability Consortium (a group of voluntary associations representing disabled people, disabled people themselves being represented on those associations) an assurance that people will be able to use the disabled person's Railcard to purchase through tickets. It will be immensely difficult for people with disabilities to attempt to locate ticket booths in various different stations en route.

This afternoon I received a letter from the noble Earl, Lord Caithness, saying that the Government were prepared to deal with the matter by giving instructions to the franchising director instead of dealing with it in the Bill. The noble Earl sent a copy of the same letter to the noble Lord, Lord Renton, with whom I had a brief discussion. We both feel that it would be better if the matter were dealt with in the Bill. However, the Minister has kindly suggested that we should meet him to discuss the matter further and we should like to take advantage of his offer. With that in mind I shall not move the amendment.

[Amendment No. 50 not moved.]

Baroness Flather moved Amendment No. 50A: Page 27, line 29, at end insert: ("( ) Any franchisee or licensee to provide the railway service shall include conditions requiring the franchisee/licence holder—

  1. (a) to make arrangements for promoting, in relation to employment by him, equality of opportunity between men and women and between persons of different racial groups:
  2. (b) to review these arrangements from time to time and
  3. (c) to provide a statement to the Franchising Director as required of the action taken to give effect to such conditions.").

The noble Baroness said: I should like to draw the Committee's attention to matters relating to employment on the railways and ethnic minorities. A significant proportion of BR's current workforce is of ethnic minority origin. Over the past year BR, together with the Commission for Racial Equality, has been working to reduce discrimination by putting in place policies and practices to ensure equality of opportunity. British Rail has made a commitment to take action to improve opportunities for ethnic minority groups, particularly in access to jobs such as that of train driver where at present there are very few black people

A framework is being put in place but it has yet to make an impact on the management of the business. Recent reports of racial discrimination such as that concerning four Asian train drivers highlighted in the Independent on Sunday of 27th June, suggest that there is still a long way to go before equality of opportunity becomes a practical reality.

Although under the proposed new arrangements some rail services will continue to be run by the current organisation, others will be run by private businesses, through franchise or licence arrangements. But because equal opportunities policies have not yet become an integral part of management practice in BR, there is a clear risk that inequality will persist when the operation is devolved and dispersed to several smaller businesses. That is why I believe it is essential to have in place a specific framework which will help to ensure that the new franchisees have a clear responsibility for implementing the policies which have already been laid down by BR.

We know from many years of experience that it is no good relying on the general duties against discrimination which the law imposes on employers. That is why 10 years ago Parliament approved the race relations code of practice. Despite that code and the guidance issued by the CRE as well as last year the excellent "Ten-Point Plan" issued by the Department of Employment, many employers have done very little to ensure that there is equal opportunity within their workforce. Public services have a special responsibility for acting fairly. Their customers are from all sections of the community. Their workforces should also reflect that at all levels.

We cannot leave it just to the good intentions of the new managers. We must make sure that the present policies of BR are carried out. The best way to do that is to include in the Bill a requirement as proposed in this amendment.

Requirements of this kind are not new. They have proved to be an important safeguard. Since 1976, local authorities have had a general duty to promote racial equality. Training and Enterprise Councils must make sure that their functions are carried out so as to provide equal opportunities. Broadcasting licence holders too must show how they are providing equal opportunities.

It is recognised that employers in the public services must set an example. A significant proportion of the current workforce is likely to be redeployed in the newly constituted businesses and the current organisation is expected to play a leading and important role in developing a framework of guiding principles and personnel practices, including the equal opportunities policy.

I urge my noble friend the Minister to provide that protection by making suitable provision in the Bill and accepting this amendment. I beg to move.

Lord Clinton-Davis

I rise briefly to support what has been urged on the Minister by his noble friend Lady Flather. The fact is that even today all is not as good as it should be in terms of the provision of jobs with British Rail. The situation could be infinitely worse if the position arises where a large number of new employers come on to the scene who have no specific experience in the field of ensuring proper access to jobs.

As the noble Baroness said, there are good precedents to be followed. I hope that her arguments commend themselves to the Minister and that we hear a positive reply.

Lord Redesdale

From these Benches I should like to say that one of the problems we have with the Bill is that in cutting back on unit costs any franchisee will look at labour costs as being areas where money might be saved. With a large-scale reduction in manpower it would not be right for provision not to be made as indicated in this sensible amendment; that is, to ensure that equal opportunities exist in future rail services.

The Earl of Caithness

I fully understand the anxiety mentioned by my noble friend Lady Flather when she so ably moved the amendment. I do not disagree with her. The Government want to see the promotion of equal opportunities. However, while Government policy is to encourage equal opportunities for the sexes, ethnic minorities and disabled people, we do not see why the railway industry specifically should be subject to such statutory obligations as the amendment envisages.

In the case of railway operations we see a progressive devolution from the public to the private sector, with BR's existing workforce transferring to new employers. That workforce is already multi-racial and BR already operates a policy of equality of opportunity for men and women. BR has had an equal opportunities officer since 1985 and in recent years have introduced a number of schemes, including equality targets for recruitment, ethnic monitoring and return to work schemes for parents with young children. I would hope and expect BR and its successors to build on that good record.

However, I remind my noble friend that it would be possible for the Secretary of State to require the franchising director, through the objectives, instructions and guidance that he will issue, to impose anti-discrimination requirements on franchisees. That gives the safeguard that my noble friend needs. Instead of writing it on the face of the Bill and singling out the railway industry, it will be possible for my right honourable friend the Secretary of State to give the guidance to the franchising director if it is felt at any stage that the aims we both wish to see—that is, of equal opportunities—are not being fulfilled in the spirit that we would hope.

Lord Clinton-Davis

But will the Secretary of State exercise those powers? We want to hear that the guidance will deal specifically with those matters.

The noble Earl said that the railway industry was being singled out in this matter. But the noble Baroness pointed out in her opening speech that provisions existed in relation to local authorities, the broadcasting licence holders and the training and enterprise councils. The Minister conceded that the practices to which he has given encouragement and which have been at least partially undertaken by British Rail, are commendable. That being the case, and as we are possibly going to be in a new scenario with a large number of other companies conceivably entering the scene, can he not say to the Committee, at least tonight, that he will give favourable consideration to the Secretary of State exercising his powers under the policy guidance in order to give a clear indication that the Government want these ideas to be followed by the new franchisees?

9.30 p.m.

The Earl of Caithness

I have listened with great care to the expertise of my noble friend and to the words of the noble Lord, Lord Clinton-Davis. I would like to talk to my right honourable friend the Secretary of State about what has been said and about the concerns of the Committee.

Baroness Flather

I am grateful to my noble friend For his remarks, which are somewhat encouraging but not as encouraging as I should have liked. As has already been pointed out, railways are not being singled out. There have been other examples. The noble Lord, Lord Clinton-Davis, pointed those out.

The other point I should like to take up is the question of British Rail already operating a policy. I made it clear that the policy is not totally successful and in place yet. It is on its way but is not there. Like British Rail, it is getting there, but has not yet arrived. Once the dispersal takes place it may become even more diffused through being divided up into small sections. I worry about that aspect.

It seems to me that a great deal of ground will have to be covered by the guidance that will be issued. Quite a number of issues that have been aired in the Chamber will be covered by the guidance. I would feel a great deal better if one could have sight of specific aspects which will be covered by the guidance. If there is to be guidance on equal opportunities, I hope that it will be available to us. I know that my noble friend the Minister said that the document is in the Library. Does it contain the guidance on equal opportunities?

The Earl of Caithness

I am happy to confirm to my noble friend that a copy of the guidance is in the Library. At the moment, from recollection and from having read it, I do not believe that the requirements that she particularly wants with regard to equal opportunities are in the document. We are looking again at the document with a view to updating it having taken account of the Bill going through both Houses of Parliament. That is the point that I would like to discuss with my right honourable friend the Secretary of State.

Baroness Flather

Am I then to 'believe that my noble friend the Minister will have another look at this aspect of the guidance? I am not clear as to the procedure of what will happen next. Will there be something in the guidance eventually? Is there some kind of assurance? On that basis I would be willing to withdraw the amendment. If there is no assurance of any kind except that the Government will think about it, I would be less than satisfied.

The Earl of Caithness

I hope my noble friend would not think that I would give a commitment to discuss this matter with my right honourable friend and dismiss it lightly. I cannot give her a guarantee that it will be included in the guidance. But rather than having it on the face of the Bill, it is the very flexibility of having the guidance that allows the Secretary of State to update it at any time. Although I cannot give the ultimate assurance that my noble friend would like, I can give her the assurance that I shall discuss with my right honourable friend the Secretary of State the matters that she has raised and then come back to her.

Baroness Flather

In that case. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Carmichael of Kelvingrove moved Amendment No. 51: Page 27, line 32, at end insert: ("( ) When entering into franchise agreements in respect of passenger railway services operated at the date on which this Act was passed by the subsidiary of the Board known as Inter City, the Franchising Director shall ensure so far as it is reasonably practical to do so that these services are operated by a single franchisee.").

The noble Lord said: It may be for the convenience of the Committee if we take Amendments Nos. 52 and. 53 with Amendment No. 51. The amendments have a certain amount in common. The first amendment, if carried, would effectively hold together the existing InterCity subsidiary of British Rail as a single business by requiring the whole network of services to be left as a single franchise. Prospective private sector franchisees have so far only expressed an interest in what is known in the business as the cherry-picking profitable routes, such as the east coast mainline. One of the apples in the eye of anyone looking for a quick buck is the Gatwick Express.

It is unlikely that arty private company would be willing to take on the whole network., including unprofitable routes such as the west coast mainline. Therefore, only BR, through its InterCity subsidiary or, possibly a buy-out by the existing management, would remain an option.

Amendment No. 51 is the introductory amendment. It expresses the opinion of the management of InterCity in its submission to the Transport Committee in another place. The management said: There is no single correct way to structure the business, but I believe that a unified InterCity has the strength and expertise to help overcome many of the challenges in reorganising a highly complex industry". That appears in volume II of the report at page 292, paragraph 7.

InterCity has just declared a profit for the fifth successive year. That is very important. It is the only profitable long-distance railway network in the world. Its structure allows highly profitable routes like the east coast mainline to cross-subsidise non-profitable routes such as the west coast mainline, avoiding the need for public subsidy to the latter. The break-up of the InterCity network will mean, if it happens, that private franchisees would cream the profits from the lucrative routes while the nation will find itself paying public service obligation grant to lossmaking InterCity services for the first time in many years.

InterCity has been successful precisely because of the uniform management of the business. InterCity's strength rests on its proven reputation as a product or brand which has positive resonance with the public. It is one of the services which has caught on. In fact, market research has consistently shown InterCity to prompt far warmer responses from interviewees than merely asking them about British Rail.

Amendment No. 52 tries to give examples of private sector companies co-operating in the way envisaged by the amendment. The clearest of these is the grouping of independent television companies, or Channel 3. These companies operate separate regional franchises yet they are happy to co-operate on programme scheduling and marketing. There are obvious parallels here with the railway franchises.

An example of the chaotic alternative is to be seen with London's buses and many other bus services in other parts of the country. I can certainly give Glasgow as an outstanding example of the chaos which has been caused by the total free-for-all. Since the mid-1980s London Regional Transport has issued franchises on the basis of competitive tender. Many of those franchises have been won by companies other than London Buses with its traditional fleet of red liveried vehicles. The result has been a jumble of multi-coloured buses creating an image of dislocation and harming one of the best-known tourist images in the capital; namely, the London red bus.

However, it is only fair to say that the bus I catch frequently from where I live in London sets a very high standard. It is the Grey-Green service. Therefore, to be absolutely fair, although there are some very creaky and ragged buses in both London and Glasgow, there are one or two examples of excellent private buses. It would be wrong not to state that.

Amendment No. 53 allows the franchising director to designate two or more franchisees for coordination. These need not just be InterCity routes but could involve Network SouthEast or Regional Railways services also. The latter two companies have successfully integrated and "branded" a diverse range of British Rail operations, ensuring, for example, that all the railways surrounding London co-operate with one another and that previously impossible cross-country journeys can now be taken. The franchising process threatens to eliminate all those improvements by replacing coherent networks with fragmented local services. The amendment allows the process of fragmentation to be arrested.

The important idea behind these three amendments is that InterCity should be kept together. I hope that the Minister will look at them favourably. Their wording may not be exactly what he would like or be acceptable to him, but I hope that he can accept the fundamental purpose behind them. I beg to move.

Lord Redesdale

InterCity is the one aspect of British Rail with which nobody has any difficulty. It is a very efficient service. Most Members of the Committee will use it regularly, as I do to get to Newcastle and back. I have no complaints about it whatsoever. I hope that, through these amendments, the unified management of InterCity can be retained. I hope also that the planned fragmentation of management between directors for the North and for the South of the country, rather than a director for the whole country as at present, will not go ahead. The unified nature of InterCity should be kept intact.

Lord Swinfen

Why do away with the competition? I refer, for example, to the routes from London to Exeter and to what used to be the Great Western Railway and the Southern Railway. One can take two different routes. By keeping all the franchising in one entity, one does away with the competition.

I am interested and pleased to note that the noble Lord, Lord Carmichael, would like to keep discounts for various people, but I wonder why in paragraph (e) of Amendment No. 53 he does not include a discount for disabled persons, as he does in paragraph (e) of Amendment No. 52. I am sure that that is an oversight.

Lord Carmichael of Kelvingrove

If the noble Lord examines what has been said already, he will find that that was dealt with in an earlier amendment.

Lord Swinfen

Fair enough.

I also wonder why there should be a common identity for employees' uniforms and for train liveries. I do not see the need for that. Different franchisees will want their own liveries to show their distinctiveness. They will want them so that people will recognise them when they are doing a good job. Equally, people will be able to recognise them if they are doing a bad job.

Earl Attlee

I should like to support the noble Lord, Lord Carmichael of Kelvingrove, and to say, first, "If it isn't broken, don't fix it". The Minister will say that we need competition and that we must therefore have several franchisees. However, I am sure that he is aware that there is an awful lot of competition on the routes from cars, coaches and planes. We need InterCity to provide unified marketing against those other modes of transport.

9.45 p.m.

The Earl of Caithness

I listened with care to what the noble Lord, Lord Carmichael of Kelvingrove, had to say. I obviously wish to read the Official Report carefully tomorrow. There seemed to be some contradiction in what he was saying. He said, on the one hand, that people would cherry-pick, for instance, the East Coast main line. If there was any cherry-picking to be done, people would take the profitable InterCity route and leave the rest for other potential franchisees which, with the Bill as now amended, would include British Rail. That is something at which I should like to look.

We believe that it will be a stimulus to all operators if they are given a wide opportunity to pursue franchises that will include some InterCity lines and some non-InterCity lines. It would not be a question of cherry-picking a particular line such as the East Coast main line, because, as my right honourable friend the Secretary of State has made clear, franchises will be in blocks. So there will be the possibility of some profitable lines and the probability of lines still requiring the public sector obligation which will require subsidy.

I agree with the noble Lord, Lord Carmichael of Kelvingrove, that there have been significant improvements in service quality offered on InterCity routes in recent years and a marked improvement in customer care. But having said that, we believe, and I think BR would acknowledge, that there is still more to be done.

As a result of those service improvements it is fair to say that the InterCity name is not tarnished in the pubic mind in the same unfortunate way as perhaps BR is. Nevertheless, I fear that the thrust of the noble Lord's amendments runs somewhat counter to our franchising proposals.

Our proposals for franchising railway services are rather different from the franchising system that operates in some other businesses. Where, along our high streets, many shops are run under a franchise, through which a small shopkeeper is able to operate under the name of a well-known and recognised brand and sell a range of tried and tested products, our proposals for the railway are for the private sector to come in and mould the range of products on offer so that they match rather better the wishes of their customers, and that they do so under their own name.

We do not want to constrain franchisees' decisions on what colour they should paint their trains or—here I am pleased to be able to agree with my noble friend Lord Swinfen—what uniforms their staff should wear. That is hardly a proper subject for regulation. We can surely leave the private sector to decide how best to present its product in the market place. Indeed, rather than take steps to protect a national system, we see advantage in more local loyalties being fostered. However, as I have mentioned, I think that the image of the InterCity brand is slightly different from that of BR, and we are therefore considering proposals under which the brand might be made available to franchisees who wish to use it.

The noble Lord's amendments also raise a number of concerns where I think he and I are rather closer in outlook. He is seeking reassurance that franchisees will be required to co-operate in a number of respects to preserve network benefits. The Government have already given certain commitments in that regard. They are set out in the policy guide which has been made available to the Committee, but I am happy to repeat the key points today.

On through-ticketing, the Government have made it clear that passenger train operators will be required to participate in common arrangements for through-ticketing and revenue allocation, based at the outset on BR's existing systems. That will be a requirement of the train operator's licence. Operators will be able to issue through-fares across the range of ticket and fare types, as now.

On timetabling, franchising will proceed progressively and on the basis of the existing timetable. So the process will enable due regard to be given to ensuring timetable connections. There will continue to be a published national timetable. Railtrack will be required in its licence to ensure publication if that is not undertaken as a commercial initiative by the private sector.

On discounted fares, the Government have brought forward their own amendment to meet commitments given in the other place which will impose suitable obligations on franchisees.

On the question of joint marketing, it will be open to operators to co-operate through joint industry arrangements where they see benefit in presenting a united front to the passenger. Where necessary, licences or franchise agreements will be used to require collective participation. The Government see no difficulty in that provided that there is no suggestion of restrictive practices. The regulator cart be expected to exercise a general oversight of any such arrangements to ensure fair play.

My noble friend Lord Swinfen raised the question of competition on the former Great Western line. It is roughly the same area which will be the subject of a franchise and bidding for the franchise in the first place will be a competitive situation. now including British Rail as the Bill has been arnended by the Committee. Having remembered the glories of the Great Western days, I am sure that my noble friend will agree with me that the point about the advantage of local loyalties is best dealt with in a rather different fashion from that suggested in the amendment.

Lord Carmichael of Kelvingrove

I thank the Minister for the clarity of his reply. I thank him for the latter part of his reply, in which he suggested that we were perhaps rather closer together than we were on earlier amendments.

I felt that the noble Earl was rather grudging in his praise of InterCity. Taken as a whole, InterCity is a real success. It is the only long distance railway in the world which runs without a subsidy. All of us who use it are greatly impressed by it. More and more passengers are using the London to Scotland trains and, indeed, those trains are becoming a serious rival to the airlines, particularly on the London to Edinburgh route. On the other hand, because it its so profitable, it is able to maintain the west coast line which, although it is not profitable, is a vital line.

I agree that some of the matters referred to in the amendment may seem rather petty. The noble Lord, Lord Swinfen, mentioned uniforms. That was merely a suggestion. InterCity has done so well because it has presented an efficient image. Members of staff are proud of their image and are proud of their uniforms. I agree with the noble Lord that it may be too much to include such matters in statute but I wished to convey to the Committee how, for example, the provision of uniforms has improved the image of InterCity. I merely wished that matter to be treated as a suggestion.

I am grateful to the Minister for his assurance that he will look again at certain matters. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 52 to 54 not moved.]

Clause 25, as amended, agreed to.

Lord Ewing of Kirkford moved Amendment No. 55: After Clause 25, insert the following new clause: ("Agreement between Franchising Director and Railtrack .—(1) The Franchising Director may enter into an agreement with Railtrack to provide track and associated services for train operators. (2) Any sums required by Railtrack by virtue of this section shall be paid by the Secretary of State to Railtrack out of money provided by Parliament.").

The noble Lord said: In moving this amendment, I shall speak also to Amendment No. 56. Both amendments deal with the question of the payment of the public service obligation grant to unprofitable routes and whether that payment should be made to the franchisee on the one hand or, as in Amendment No. 55, to Railtrack on the other. The purpose of Amendment No. 56 is to remove the franchising director from the arrangements for paying the public service obligation grant to British Rail in cases where British Rail is running the service.

I promise the Committee that I shall not delay it long. However, I sketch in the background because I believe that, since we resumed our discussions, the noble Earl has referred three times to the Bill as amended by the decision which the Committee gave on the amendment moved by the noble Lord, Lord Peyton, which permits British Rail to bid for the franchise. It may well be that I am naive. I am the first person to admit that there are times in my life when I am the most naive person in the world. But the fact that the Minister referred three times to the Bill as amended, thus permitting British Rail to bid for the franchise, gives me the clear impression that the Government have decided to accept the verdict of the Committee this afternoon.

If that is the case, then it radically alters the discussion that Members of the Committee will have on many of the amendments that are yet to be moved, not least Amendment No. 56, with which I shall deal shortly. I am really tempting the Minister down the path either to confirm my naivety or my confidence that the Government have agreed to accept the decision taken this afternoon by the Committee. I hope that he can confirm that that decision will stand and that the Government will not seek to reverse it when the Bill returns to another place.

I turn briefly to Amendment No. 55. The Bill contains provisions that the payment of the public service obligation grant will be paid to the franchisee. As Members of the Committee know, that is a grant paid for unprofitable yet socially desirable routes. The provisions of the Bill lay down that that grant would be paid to the franchisee. My amendment would make that payment to the track authority rather than the franchisee for the very good and proper reason that it is the track authority which has the responsibility for maintenance and development of the track and not the franchisee.

I am sure that Members of the Committee are becoming a little fed up with hearing reference to the Swedish system, but what is proposed is basically a carbon copy of what happens in Sweden at present, where the subsidy paid on unprofitable yet socially desirable routes is not paid to the franchisee—that is, those who run the service—but is in fact paid to the track authority. In our view, the proposal in the amendment makes far more sense in economic terms and far more sense as regards the development of the network than does the provision contained in the Bill and laid down by the Government.

I can understand what is in the Government's mind—at least, I think that I can; although it is always dangerous for an Opposition spokesperson to say that he can understand the Government's thinking—namely, that the obligation on the track authority to charge economic fees from the franchisee is an attempt to make the track authority into a profitable organisation in order, at a later date—that is, if the Government get their way—to privatise the track authority. I see that as the pattern lying behind the obligation on the track authority to charge an economic rent from the franchisee.

Amendment No. 55 would change the position completely. The public service obligation grant would not be paid to the franchisee but would be paid to the track authority in recognition of its responsibility to develop the network. The obligation then on the track authority will be to charge the franchisee the marginal costs—that is, the marginal costs of the electricity used, wear and tear, the necessary added man hours for signalling work, or anything of that description. However, they would be marginal costs and would certainly be very much lower than the economic costs that are laid down, although not clearly defined, in the legislation that we are discussing.

In our case it is quite a simple approach and quite a clear choice. We either pay the public service obligation grant to the franchisee and allow the track authority to charge an economic rent for the use of the track, or we pay it to the track authority in recognition of its responsibility to develop the network. The track authority would then charge the franchisee marginal costs.

I now turn to Amendment No. 56. Amendment No. 56 is one of those amendments that is affected by the decision as to whether or not the Government accept the verdict reached by the Committee this afternoon on the amendment of the noble Lord, Lord Peyton. I openly admit that Amendment No. 56 was clearly framed and tabled in the belief that all that would be left to British Rail would be those uneconomic and unwanted routes in which no one else was interested; what is described as the rump of the system. But I am the first to accept that if the Government accept the verdict reached by the Committee this afternoon, that situation is completely altered and Amendment No. 56 is accordingly affected.

All I can say about Amendment No. 56 at present is that it is very much a probing amendment. It seeks to remove the franchising director from the arrangement whereby for the uneconomic routes—those that we envisaged British Rail would have before the Committee accepted the earlier amendment—the Treasury (these are complicated arrangements) would pay the franchising director and then the franchising director would pay British Rail. Our Amendment No. 56 would remove the franchising director from that transaction and the grant would be paid direct from the Treasury to British Rail itself.

I say as an attraction for the noble Earl, Lord Caithness, that the measure would also help in relation to the arrangements that are defined in Clause 124 of this Bill—again these are complicated arrangements—whereby the freight side of British Rail may receive compensatory payments for the use of the track. That is defined in Clause 124, but our Amendment No. 56 would simplify that by making these payments direct to the company itself. Our amendment would also remove the franchising director from that transaction.

I close where I began. These amendments are to a great extent affected by the decision as to whether or not the Government have now decided to accept the will of this Committee. I look forward with great interest to hearing the noble Earl's reply. I beg to move.

10 p.m.

The Earl of Caithness

The noble Lord, Lord Ewing, in a beguiling speech tempted me to give an answer which he knows full well I cannot possibly give him today. The situation is clear. The amendment that the noble Lord mentioned was accepted by this Committee. That is the position and it is written into the Bill. I have referred to that on four occasions since eight o'clock. The Government must consider their position in the light of what has happened. It will take some time for the Government to reach a decision and I cannot possibly give the noble Lord an answer tonight.

I now turn to the amendments before us. We have indicated that we intend the franchising director to assume responsibility for making all subsidy payments, whether to franchisees or to BR, from April 1994. We believe it makes good sense for him to have overall control of the subsidy budget, while the Secretary of State will remain responsible for the overall size of that budget.

Clause 44 provides for the franchising director to enter into agreements with the British Railways Board for the provision of railway passenger services. By virtue of Clauses 15 and 17 the franchising director will be able to enter into access agreements with Railtrack to secure rights to use track for the benefit of franchise operators and of others with whom he contracts to provide railway passenger services. Clause 15(11) provides for the franchising director to make payments under such agreements.

Where at the end of a franchise the franchising director has been unable to grant a further franchise agreement, he will become responsible for securing the provision of the necessary services. He may do so through a wholly owned company which would in turn need an access agreement with Railtrack.

But I can see no advantage in the franchising director entering into agreements—be they with franchisees, the board or other train operators—for which the Secretary of State would pay. That does not strike me as a recipe for good financial management or for maintaining proper accountability for the expenditure of taxpayers' money. The Secretary of State will still be able to make payments to the BR board. He will be able to make grants to Railtrack. But I see no advantage in his paying for services delivered under contract to the franchising director.

As a general principle the Government do not believe in providing direct subsidy towards the cost of infrastructure. The purpose of government support is to provide railway services for passengers. It is much better targeted if provided directly to trained service operators rather than for infrastructure, which can and will be used by any services whether or not they are socially necessary and require subsidy. I wonder whether the noble Lord, Lord Ewing, being a reasonable man, will agree that the Bill is rather better than his amendment.

Lord Ewing of Kirkford

I look around in despair and say to the Minister that I find it difficult to accept his proposition that the Bill is rather better than my amendment. It may be that both are equally bad but I doubt whether one is better than the other.

Against that background and the Minister's reply I am prepared at this stage to withdraw Amendment No. 55 and not to move Amendment No. 56. However, I still have a doubt in my mind about the future of the Bill and I put down a marker that we may well wish to return to the subject at a later stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 56 not moved.]

Lord Clinton-Davis moved Amendment No. 57: After Clause 25, insert the following new clause: ("Change in control of franchise operator .—(1) It shall be a term of a franchise agreement that no change in the persons having control over the franchise operator takes place for the relevant period unless such change takes place with the prior.approval of the Franchise Director and the Regulator. (2) In this Part, "the relevant period" means the pericd beginning with the date of the award of the franchise and ending on the fifth anniversary of the date of its coming into force. (3) The Franchise Director and the Regulator shall refuse to approve for the purposes of this section such a change—

  1. (a) if it appears to them that the change would be prejudicial to the provision under franchise by the franchise operator of a service which accords with the service specified in the franchise agreement or
  2. (b) it appears to them that the change would be prejudicial to the duties conferred on them by sections 4 and 5 above.").

The noble Lord said: Again I can be brief. The amendment is also to a considerable extent predicated on the ultimate decision in relation to the earlier amendment which was adopted by the Committee.

Our purpose is to debar the takeover of any passenger franchise operation for a period of five years without the prior approval of the franchise director and the regulator. Subsection (3) sets out the conditions which would debar any takeover. There is ample precedent for that in Clause 21 of the Broadcasting Act 1990, which permitted the Independent Television Commission to cancel a Channel 3 franchise where the ownership of the franchise company changed. The ITC could sanction such a change but only subject to certain essential criteria.

In the context in which we are now discussing the matter we are seeking to avoid an unwanted takeover, for example, by a regional bus company which wishes to become a monopoly provider of transport or by an asset stripper. The amendment also has the effect of restricting opportunities which might otherwise be available for stalking-horse companies to acquire franchises on behalf of others who might be considered undesirable.

The Broadcasting Act provided for protection for only 12 months. We believe that in the circumstances of this case that would be too short. If the Government were prepared to concede the principle involved we should not be tied to any particular time limit. We can discuss the matter together, but the principle must be addressed. I wish to know what reasonable argument may be adduced against this eminently sensible proposition. Clearly there is a risk of an undesirable franchisee emerging. I do not believe that the Bill satisfactorily deals with that situation and should therefore be amended to make provision for that. I beg to move.

The Earl of Caithness

Clause 24(4) already provides for the franchising director's approval to be sought before a franchisee takes any action which would result in a franchise operator—his wholly owned company—ceasing to be a wholly owned subsidiary of his. The franchising director will need to take a judgment on the implications of any such transaction for the continued performance of the franchise operator in providing the services specified in the franchise agreement.

The noble Lord, Lord Clinton-Davis, is clearly concerned about the ownership of the franchise operator. I listened with care to what he said, but I did not find it terribly convincing. Surely the real concern is the delivery of services specified in a franchise agreement. It was, I believe, the noble Lord, Lord Marsh, who stated on the first amendment that we debated today that it does not matter about the ownership. The real concern is the delivery of the appropriate service. I share that view with the noble Lord, Lord Marsh. It is that which should be the franchising director's primary concern. If a franchisee, for whatever reason, is failing to perform to a specified standard, then there will be, as the noble Lord, Lord Clinton-Davis, acknowledges, a range of sanctions at hand for the franchising director to employ which will lead ultimately to the termination of the franchise agreement if necessary.

Lord Clinton-Davis

I do not find that answer particularly satisfying. However, I do not dissent from the proposition that the essential question is the delivery of service rather than ownership. The problem is that the two cannot always be separated. My case is predicated on the argument that the sanctions to which the Minister referred are hopelessly inadequate to deal with the practicality of the situation. We shall come to that issue later.

However, I worry about the fact that certain influences could be brought about which are not immediately apparent at the time that the franchise is granted and, because the sanctions are not adequate, a certain degree of prejudice will exist about the provision of the services. I do not expect the Minister to agree with that. We shall come to the effectiveness of the sanctions later. I shall study what the Minister said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 26 [Failure to secure subsequent franchise agreement]:

The Earl of Caithness moved Amendment No. 57A: Page 27, line 44, after ("services") insert ("for the carriage of passengers by railway").

The noble Earl said: This is a technical amendment. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 57B to 57D not moved.]

Lord Carmichael of Kelvingrove moved Amendment No. 57E: Page 28, line 14, at end insert: ("(3) In respect of services within or affecting a Passenger Transport Authority area the Franchising Director shall give notice to the Passenger Transport Executive, for the area in question, of any proposals to act within subsection (2) (a) or subsection (2) (b) above and require the Passenger Transport Executive to make a statement within 14 days of the notice or such lesser period as is reasonable in the circumstances. (4) The statement under subsection (3) above shall specify the services for the carriage of passenger by railway which the Passenger Transport Authority, for the area in question, considers it appropriate to secure to meet any public transport requirements within that area and may also specify the minimum level of quality in respect of such services, together with requirements in respect of the fares to be charged, to persons using such services. (5) Where a Passenger Transport Executive has submitted a statement under section 26(4) above the Franchising Director shall ensure that such services continue to be provided for a period of three months pending further discussions between the Franchising Director and the Passenger Transport Executive").

The noble Lord said: As drafted, Clause 26 places a duty on the franchising director to secure the provision of services if a franchise were terminated but no immediate award of a further franchise was made. However, subsection (2) does not require the franchising director to take into account the requirements of a passenger transport executive which, under Clause 29, will be a joint signatory to a franchise affecting its area, when securing services under those circumstances. The purpose of the amendment is to place a duty on the franchising director, first, to give notice to the PTE of intention to take action to secure the continuation of services, and to request it to make a statement of its requirements for any interim services within 14 days. Another purpose is that it allows the PTE to specify the services arid quality that it requires. Lastly, it requires a franchising director to secure those services in the interim period, pending further discussions with the PTE on the long return situation dealt with in subsection 26(5).

The general point of the amendment is to seek clarification of the Government's view on what role the PTEs would play in the interim period, if a franchise were not to be renewed, and how that would be secured. It is understood that the Government are minded to deal with it by giving the franchising director yet more instructions.

Our view is that it is not a satisfactory response and that there should be something on the face of the Bill to protect the interests of the PTAs and PTEs which will pay financially for the services in any period during which there is no franchise. It should also be noted that the Transport Act 1968 places a duty on PTAs and PTEs to meet those transport requirements.

I believe that this amendment is absolutely vital when considering the chaos that might be caused if there were a sudden collapse of a franchisee in an urban area, with no back up quickly to replace it. Therefore, I hope that the Minister will look at the amendment sympathetically. I beg to move.

The Earl of Caithness

In his lucid explanation of the amendment, the noble Lord, Lord Carmichael, came to the point at the end when he said that he was talking about the sudden collapse of a franchisee. That means that one is stressing the point that we are talking about circumstances where the franchising director might need to act very quickly indeed. It is difficult to make provision for him to do so while at the same time providing a notice period, as the noble Lord's amendment would require, for him to consult a PTE. That is something which we have discussed with the PTEs, which are, nevertheless, concerned that their ability to specify fares and quality should not be curtailed.

We do not expect instances of franchises ending without a subsequent franchise having been awarded to be common. Where they occur, we expect them to be short. All those involved will need to act quickly and pragmatically to plug the hole. The PTAs and PTEs, believe, recognise that. Furthermore, I do not think that it would be advisable to stipulate a period of time in respect of which the franchising director is to ensure that services continue to be provided. I think that such a question should be left for decision at the time, depending upon the circumstances which obtain.

Nevertheless, I am prepared to accept that the relationship between Clause 26 and Clause 29 is worthy of further refinement, and 1 am therefore prepared to reflect on the noble Lord's amendment to see whether, following further discussions with the PTAs and PTEs, we might be able to bring forward an amendment on Report which would meet his concerns.

Lord Carmichael of Kelvingrove

I am grateful to the Minister for showing such flexibility and it would be churlish of me not to thank him for whatever he brings forward when he has considered the amendment. We thank him for his sympathetic examination of it and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.,lb/> 10.15 p.m.

On Question, Whether Clause 26, as amended, shall stand part of the Bill?

Lord Clinton-Davis

I wish to raise a brief but important point with the Minister with regard to the questions that arise on failure to secure a subsequent franchise agreement or, related to that, to secure the position when a franchise agreement is breached. 1 raise the matter in the context of the PSO grant. Is the Minister envisaging that, in a situation where British Rail would be expected to pick up the tab, acting quickly and pragmatically as the Minister said, it is expected to do that without any assurance that it will be assisted through the PSO grant? If that were the case, it would be monstrously unfair, and indeed would render it much more difficult to fill in the gaps which would arise in a situation of that kind. I do not want to labour the point any longer, but it is important and we urge the Minister to clarify the situation, if he can, here and now.

The Earl of Caithness

That would be a question for the franchising director. It might not necessarily he British Rail that fills the gap. The franchising director is under a requirement, as it were, to fill the gap. Therefore he would turn to whomsoever was the appropriate party. It would be any train operator. It might be that British Rail did not have railway stock in that part of the world, and it might be better to turn to "Clinton-Davis Railways Limited" to fill the gap. That must be a question for the franchising director. The franchising director will have a budget and will of course be watching every franchise and what is happening. I take the point that the noble Lord made about a situation where one has the PSO grant, which will probably be applicable in the case of a franchise, but the franchising director will take that into account within his budget.

Lord Clinton-Davis

The franchising director will operate to a limited budget. He will have to consult with the Government about the application of that budget. We have foreseen in earlier debates the possible effect of the constraints on the franchising director which could well lead to serious prejudice so far as rural services are concerned, which are the most vulnerable. These matters cannot be quite as easily and glibly dealt with as the Minister has suggested. What we require from the Minister—perhaps not tonight, but certainly during the course of this Committee stage or the Report stage, is clarification as to what can happen here. The lack of clarification could have very serious effects upon what the Minister seeks to achieve; namely, filling in a gap with the least possible delay.

I am sorry; I should have declared my interest—the Minister has discovered an interest that I have not revealed to this Chamber: Clinton-Davis Limited, providers of railway services!

The Earl of Caithness

I certainly hope that the Committee does not think that I treated this matter glibly. It is of most serious concern. The noble Lord will be aware that we have given enormous thought to the question of the continuation of franchise, both at the end of a franchise or, in the unfortunate (and we hope very rare) event where there is a transfer mid-term, as it were, when a franchise does not work out as the franchising director had hoped. I take note of what the noble Lord says. I hope that I shall be able to reassure him at a later date.

Clause 26, as amended, agreed to.

[Amendment No. 57F not moved.]

Clause 27 [Additional railway assets: assumption of responsibility by, and transfer to, franchisees etc.]:

Lord Clinton-Davis moved Amendment No. 58: Page 28, line 40, leave out from ("the") to end of line 41 and insert ("Board").

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 58A: Leave out Clause 27 and insert the following new clause: Leases granted in pursuance of franchise agreements: no security of tenure (" .—(1) In any case where—

  1. (a) a franchise agreement makes provision for the franchisee, the franchise operator or a wholly owned subsidiary of the franchisee to enter into an agreement ("the contemplated agreement") with a person who has an interest in a network or a railway facility,
  2. (b) the network or railway facility is to be used for or in connection with the provision of any of the franchised services, and
  3. (c) the contemplated agreement creates a tenancy of any property which constitutes, or is comprised in, the network or railway facility,
neither Part II of the Landlord and Tenant Act 1954 (security of tenure of business premises) nor the Tenancy of Shops (Scotland) Act 1949 (security of tenure of shop premises in Scotland) shall apply to that tenancy. (2) For the purposes of this section, a person shall be regarded as having an interest in a network or railway facility if he has an estate or interest in, or right over, any of the property which constitutes, or is comprised in, the network or railway facility. (3) Any reference in this section to a network or a railway facility includes a reference to any part of a network or railway facility. (4) In this section— agreement" includes a lease, underlease or sublease (as well as a tenancy agreement or an agreement for a lease, underlease or sublease); tenancy" has the same meaning as it has in Part II of the Landlord and Tenant Act 1954 or, in Scotland, as it has in the Tenancy of Shops (Scotland) Act 1949.").

The noble Earl said: Amendment No. 58A replaces Clause 27 with a new clause which reflects a simplification of the way in which we propose to allow for franchised train operators to control certain Railtrack-owned facilities in connection with passenger rail services, that is, stations, light maintenance depots and track and signalling—i.e. vertical integration. I should like to stress that this does not signal a change in our policy towards vertical integration. Rather, it reflects a change, a simplification, in approach. I hope, as a result, that it is welcomed by the Committee.

Our policy on vertical integration—that is to say, the operation by franchisees of the track as well as the trains —remains that, while control by a train operator of stations and light maintenance depots will be quite common, control by them of track and signalling will be quite rare. The Isle of Wight line is the only case so far envisaged for such full-scale vertical integration. We believe that vertical integration is neither practicable nor desirable across the great bulk of the railway network for a number of reasons.

First, operators who run both the track and the trains would inevitably face a conflict of interest when others applied to run services on their lines. That problem could be overcome only if we adopted intrusive regulation to ensure fair treatment for all operators.

Secondly, securing suitable levels of investment in rail infrastructure requires a strategic view of the kind that only Railtrack can provide.

Thirdly, the existence of a national body such as Railtrack will ensure that the safety aspects of track and signalling are co-ordinated across the network in a clear and systematic way. It would be much more difficult to achieve that if network responsibilities were spread across a large number of operators.

Lastly, we need a national body such as Railtrack to ensure that operational timetabling is co-ordinated efficiently across the whole network. If there is to be a fair deal for all operators, it must be better that the track operator does not also operate his own services.

I turn to the effect of my proposed amendment. Whereas Clause 27 currently provides for the train operator to have control of such facilities by franchisees as part of the franchise agreement, the new clause simply enables a franchise agreement to provide for the train operator to have control of stations or light maintenance depots (or track and signalling) by separate agreement with the owner of the facilities, normally Railtrack. The provision will apply only where the franchising director and facility owner (Railtrack) have previously agreed that such an arrangement should be entered into.

Because the policy is to provide for succeeding franchises to be able to manage these facilities, the clause curtails security of tenure under landlord and tenant legislation so far as the tenancy agreements between the facility owner and the franchised train operator are concerned to ensure that there is no obstacle to the handover between one franchisee and the next. That applies only to the agreement between owner and franchisee (whether that agreement is a lease, sub-lease or whatever). It does not apply to subsidiary arrangements between the franchisee and others (such as station traders).

The new clause also omits the provisions currently in Clause 27 disapplying the provisions under landlord and tenant law relating to compensation for tenant's improvements to business premises. That is because there is no public policy reason why the statutory provisions should not apply.

I commend the amendment to the Committee. I beg to move.

Lord Ewing of Kirkford

I wonder whether the Minister can clear up a nagging doubt in my mind. The amendment would leave out Clause 27. That clause happens to be the clause which was amended earlier by the amendment of the noble Lord, Lord Peyton. Can I have an assurance from the Minister—I am sure that he will find it easy to obtain—that his amendment in no way affects the decision to which the Committee came earlier in our proceedings on the amendment of the noble Lord, Lord Peyton?

The Earl of Caithness

The amendment of my noble friend Lord Peyton had effect on Clause 22. The previous amendment, Amendment No. 58, was consequential on that. I can give the noble Lord the assurance that he wants. It has absolutely no effect on the main amendment.

On Question, amendment agreed to.

Clause 27, as amended, agreed to.

Clause 28 agreed to.

Clause 29 [Passenger Transport Authorities and Executives: franchising]:

The Earl of Caithness moved Amendment No. 59: Page 33, line 1, after ("may") insert ("(subject to section (Fares and approved discount jare schemes)(3) above)").

On Question, amendment agreed to.

10.30 p.m.

Lord Teviot moved Amendment No. 60: Page 33, line 2, after ("to") insert ("and tickets to be accepted from").

The noble Lord said: With the permission of the Committee I shall speak also to Amendments Nos. 61 and 61A to 61C, and listen with interest to what the noble Lord, Lord Carmichael of Kelvingrove, has to say on Amendment No. 61ZA.

The purpose of these amendments is simple. They will make it clear beyond any doubt that the passenger transport authorities and executives will be able to ensure that franchisees accept travelcards and other forms of multi-journey tickets as part of the requirements of the franchise. Clause 29(6) (c) clearly gives the passenger transport authorities and the passenger transport executives the power to specify fares to be charged on franchised services in their areas. That amendment was made in another place and was most welcome. It is not clear, in my view, that that power would enable them also to include travelcards within the definition of "fares".

Many of us are rightly concerned about the future of London Travelcards. However, we must not lose sight of the fact that in all the conurbations outside London, there are also travelcards administered, as a rule, by the passenger transport executives on behalf of the operators concerned. They are available on all modes of transport, including local rail services, and hope that all concerned, including my noble friend the Minister, will want that situation to continue when the Bill is passed.

Amendments Nos. 61A to 61C are extremely important as they relate to a situation which may arise in a dispute between the franchising director and a passenger transport executive. I accept that the Bill should contain provision for that situation, although my experience of the passenger transport executives leads me to believe that it is most unlikely to arise.

As drafted, subsection (15) of Clause 29 gives the franchising director the power to apply to the Secretary of State for directions if he considers that they are needed to expedite matters in a dispute. That could arise if the PTE was dragging its feet in some matter or other. I believe that, while the provision is necessary, it should be available also to the F'TE. It is unfair in the extreme for one party in a dispute to have access to a person who can determine the matter, while the other does not. We would not tolerate that in respect to access to the courts or Parliament, and we: should not tolerate it in the Bill.

Amendments Nos. 61B and 61C cover an even more important aspect of the disputes procedure Clause 29(16) (c) gives the Secretary of State quite unnecessary and—I choose my words carefully—excessive powers over PTE finance. Amendments Nos. 61B and 61C remove those powers, though 1 would. not object if my noble friend, at a later stage, were to replace them with something more reasonable.

As drafted the Bill allows the Secretary of State to direct a PTE to pay for any railway services secured under franchise in its area regardless of whether or not the PTA wants the services; regardless of whether or not it can afford them, arid regardless of whether or not it considers them to be value for money. In the last. analysis it is giving the Secretary of State the power to determine local rail service policy and how local council tax-payers' money is spent. That is quite unacceptable to me and I am sure that it will be unacceptable to other Members of the Committee.

Finally, I understand that the Minister has given assurance to the PTAs and PTEs that they will deal with those matters, but have not so far acted upon that assurance. In view of that, I have no hesitation in raising the point here if Ministers are unwilling to meet their obligations. I beg to move.

Lord Carmichael of Kelvingrove

I am happy to give general support to the noble Lord, Lord Teviot, for this group of amendments. I hope that I can rely on his support for Amendment No. 61ZA, which is also included in the grouping. He has said just about all that needs to be said about the intent of the amendments. I wish to support him in a general way.

The Earl of Caithness

The issues addressed in my noble friend's amendments and in the amendment of the noble Lord, Lord Carmichael, are fa.miliar to us and indeed have been the subject of discussions between representatives or the AMA., the PTAs and my right honourable friend the Minister for Public Transport. While the wording of the amendments means that I shall not be able to recommend that we accept them, I am pleased to say that I do accept the spirit of them and hope to offer the noble Lords satisfactory assurances such that they will agree to withdraw them.

We expect the franchising director and the PTEs to work together, to co-operate willingly with each other. But we have to recognise that it is possible for disagreements to arise. The PTAs/PTEs have raised this point with us themselves. The purpose of subsections (14), (15) and (16) of Clause 29 is to provide a procedure by which any disputes between a PTE and the franchising director can be resolved.

The procedure is based on that provided for resolving disputes between the PTEs and the British Railways Board in Section 20(6) of the Transport Act 1968. This provides for the PTEs or BR to refer disputes to the Secretary of State. I draw comfort from the fact that in 25 years this procedure has never been used. I think that the procedures provided in Clause 29 should be similarly regarded as a long stop, a last resort, and one which I hope will not be used.

The procedures confer considerable powers of direction on the Secretary of State. That is necessary if he is to be able to unlock a dispute that is so serious that one or other party feels unable to resolve it through discussion and negotiation. There is not intended to be any presumption in favour of either party. Subsection (14) of Clause 29 provides for the franchising director or a PTE to refer an issue to the Secretary of State.

My noble friend's Amendment No. 61A is aimed at extending this equality of opportunity to the provisions of subsection (15). We think it is entirely appropriate to do so. Unfortunately, there is a technical flaw in my noble friend's amendment, in that it fails to amend the subsequent reference to "he" (clearly the franchising director) in line 29 of the subsection. But I agree that this subsection should be amended and I therefore intend to consult my noble friend so that he can bring forward an appropriate amendment on Report.

Turning to subsection (16) and my noble friend's Amendments Nos. 61B and 61C, I should like to stress that the Secretary of State could not exercise unreasonably the powers of direction granted him under this clause—if he did so, his action would be open to judicial review. If a PTE and the franchising director failed to reach agreement on the specification of services to be provided by a franchisee and one or other party chose to refer the dispute to the Secretary of State, it would be open to him to find in favour of the franchising director's preferred specification, the PTE's, or, indeed, somewhere in between. If he decided to direct that the PTE's specification be adopted, then he could direct the franchising director to enter into a franchise agreement on that basis. If he decided to direct that the PTE's specification should not be adopted, then our intention would be to invite the PTE not to sign the agreement. But, within a year, financial provision would already have been made through the revenue support grant mechanism for the PTE to pay for railway services from funds provided to the PTA by its constituent district councils. The Secretary of State would therefore be able to direct that these sums could be recovered. Alternatively, the PTE might prefer to be directed to enter into an agreement, so that it would still be a party to the agreement, and have a role in monitoring the franchisee's performance.

This is a hypothetical state of affairs, and I would stress three things: I trust and hope such a situation will never arise; the Secretary of State is given the ability to make directions which he may exercise—he is not obliged to use them; if the Secretary of State used his powers of direction unreasonably, he would lay himself open to judicial review.

The AMA and the PTAs have indicated to us their concern about the breadth of the power subsection (16) (c) gives to the Secretary of State. I believe that such a power of direction is necessary, and would not be abused, for the reasons I have explained. However, given the PTAs' concerns, defended so lucidly by my noble friend, I am prepared to consider whether a suitable amendment might be brought forward on Report which would address those concerns. Some work has already been done on this and discussions have been held with the PTAs and PTEs. I would not want to mislead the House into thinking that the necessary amendment would be straightforward, but I accept the point and I am prepared to see what we can do.

Turning to Amendments Nos. 60 and 61, I believe my noble friend is seeking to ensure that PTEs are able to specify in franchise agreements that franchisees participate in their local, multi-modal Travelcard schemes. Amendment No. 61ZA applies similarly to participation in local concessionary fares schemes.

I would like to assure both my noble friend and the noble Lord, Lord Carmichael, that there would be nothing to prevent a PTE inserting such provisions in a franchise agreement, subject, as with any other such provision, to the agreement of the other parties; namely, the franchising director and the prospective franchisee. The franchisee would obviously want to know what the implications of belonging to such a scheme would be and would want to take them into account in preparing his bid. The same applies to participation by a franchisee participating in a local concessionary fares scheme established under the provisions of the Transport Act 1985.

I hope that I have given both my noble friend and the noble Lord, Lord Carmichael of Kelvingrove, some reassurance that we have taken and are taking on board the concerns which they have raised and that we are seeking to overcome the problem.

Lord Teviot

I am very grateful for my noble friend's lengthy and detailed reply. I hope that he will forgive me for not replying to all the points. I shall read everything with avid interest and take up all the points which he suggested. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 61 to 61C not moved.]

Clause 29, as amended, agreed to.

Clause 30 agreed to.

The Deputy Chairman of Committees (Lord Cocks of Hartcliffe)

I now call Amendment No. 61CA, which occurs after Clause 30 and not after Clause 31, as shown on the Marshalled List.

Lord Carmichael of Kelvingrove moved Amendment No. 61CA: After Clause 30, insert the following new clause: ("Report on financial implications for Passenger Transport Authorities. The Secretary of State shall publish each year a report setting out the financial implications for Passenger Transport Authorities of the implementation of this Act and the steps he has taken to ensure that they are able to meet any additional costs which result.").

The noble Lord said: I shall be brief with this amendment because I understand that discussions are taking place in the department and that the Minister for Public Transport, Mr Roger Freeman, is having talks with the AMA. This is a major problem which must be addressed. The new clause is self-evident. At this point I am waiting to hear what the Minister has to say. He may have found out whether there has been a conclusion to the talks. I beg to move.

Viscount Goschen

The noble Lord is concerned that the valuable work which the PTAs do to support railway services in their areas should not be curtailed as a result of cost increases to them through privatisation of the railway. We are well aware of the problems which his amendment addresses. As the noble Lord mentioned, my right honourable friend the Minister of State for Public Transport has been discussing this issue with the PTA chairman. He is now discussing options with colleagues in the Treasury and in the Department of the Environment.

It is a problem which we must solve. My right honourable friend hopes to be in a position to put a proposal to the PTA chairman when he meets him later in the summer which will satisfactorily address their concerns. In the light of that explanation, I hope that the noble Lord will withdraw his amendment.

Lord Carmichael of Kelvingrove

I am grateful to the Minister. I believe that he has come some way towards what the amendment was attempting to achieve. We shall have a long time before Report stage. Perhaps the Minister will have made more progress by then. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 61CB not moved.]

10.45 p.m.

Clause 31 [Miscellaneous amendments of the Transport Act 1968]:

The Earl of Caithness moved Amendment No. 61D: Page 36, line 24, at end insert ("to any person who is (within the meaning of Part I of the Railways Act 1993) the franchisee under a franchise agreement to which the Executive is a party; (viiib) to let railway locomotives and other rolling stock on hire to a person not falling within paragraph (viiia) above-").

The noble Earl said: This amendment refines the provisions of Clause 31 as drafted. Many PTEs have invested in rolling stock to serve their areas. For the most part this rolling stock is vested in BR, the PTEs having made grants towards its purchase. We are discussing with the PTAs and PTEs the appropriate treatment of this stock and of all other past PTE-supported investment. We have welcomed the PTEs' willingness to invest and would certainly not want them to be deterred from investing in future. In some cases, the PTE owns the rolling stock itself. An amendment to the Transport Act 1968 is needed to allow PTEs to let such rolling stock on hire to franchisees.

Clause 31 provides for such an amendment to the Transport Act 1968 allowing PTEs to let rolling stock owned by them on hire. My amendment to the clause would allow a PTE to let on hire rolling stock it owns to the franchisee running services on its behalf who could then use it for services running beyond the PTE's boundaries. This would allow sensible operational deployment of rolling stock by a franchisee whose franchise may cover a much larger area than that covered by the PTE. I am sure that that is something we all want to see.

As Clause 31 is drafted, the PTE could only lease the stock on this basis with the Secretary of State's consent. That seems to us an unnecessary complication for what should be sensible operational deployment of rolling stock to the benefit of the passengers in the PTE area and all concerned. I commend the amendment to the Committee. beg to move.

On Question, amendment agreed to.

Clause 31, as amended, agreed to.

Clause 32 [Proposals to discontinue non-franchised etc. passenger services]:

Baroness Stedman moved Amendment No.62: Page 37, line 15, leave out from ("then") to the first ("the") in line 16.

The noble Baroness said: In moving Amendment No. 62, I should like to speak also to Amendments Nos. 69, 71, 77, 78 and 84 to Clauses 32, 33 and 34 which deal with closures of non-franchised passenger services, of franchised passenger services and of operational passenger networks. They introduce a new concept into the closure procedure. The regulator is able to certify the closure of certain lines or networks as minor closures without the necessity for any procedure to take place to protect users' interests. A closure is regarded as minor if it satisfies the definition set out in Clause 32(9) for passenger services or Clause 34(8) for passenger networks.

A minor closure means the discontinuance of services or discontinuance of the operation of any part of a network along which there is no station (or no station in use) where the circumstances are, in the opinion of the regulator, such that, first, any trains that would otherwise use that stretch of line or part of the network in travelling between any two stations will instead pass along an alternative route, and where any passengers travelling on any 'such trains will not be required to make any additional change of train and will not incur any significant increase in the time which their journey takes.

I believe that the concept of a minor closure is wrong because the Bill fails to set out any procedure by which an operator is supposed to bring a proposal to the regulator for certification as a minor closure. Since there is no procedure for the certification of closures as being minor closures, several unfortunate consequences could follow. The franchising director, who in every other case of a proposed closure is obliged to consider whether he wishes to continue to require a service to be provided, is deprived of that option in this case. If the regulator decides that a proposal falls within the definition of a minor closure in these clauses, then that is the end of the matter. The Bill gives the regulator no choice in the matter and the franchising director has no role. The closure is just permitted to take place.

The minor closure procedure, as I see it, would enable some important strategic sections of railway line to be closed without any closure procedures being initiated; for example, part of the main line from London to Manchester (between Stone and Colwich Junction) or parts of the main cross country route—the avoiding lines at Gloucester and Weston-super-Mare being examples. The consequences of such closures could be serious for system capacity and neither the regulator nor the franchising director could prevent it happening under the minor closure procedures if the proposal to close those sections of line satisfied the minor closure criteria.

There is no procedure for certifying a minor closure, so there is clearly no consumer protection either. The regulator has complete discretion to determine what is meant by a "significant" increase in journey time. He does not have to consult anyone about it, and certainly not the RUCCs which for all other closure proposals are required by the Bill (as under the present arrangements) to receive objections to the proposed closure, to assess the hardship which will occur, and to make a report which may include suggestions for alleviating that hardship. All that must happen before a normal closure can take effect, but under the new concept of minor closures there will be no role for the RUCCs.

The extent of the provisions for persons aggrieved by this or that decision of the regulator to appeal against it is one of the features of the Bill. That is certainly the case with a normal closure procedure where Clause 37 sets out such a procedure. But there is no means of appealing against any decision by the regulator to certify a closure as a minor closure. His judgment cannot be challenged except through the courts.

In summary, minor closures are a new concept under the Bill. The arrangements for an operator to seek to have the regulator certify a closure as a minor closure are not specified in the Bill. The definition of minor closures is open to interpretation. The franchising director has no opportunity to decide whether he wants such a service to continue. The RUCCs have no role, and there is no procedure for users to make any input. The regulator cannot impose conditions in relation to a minor closure, and no one has the right of appeal against any decision by the regulator to designate a closure as a minor closure except through the courts.

The proposed amendments would delete all references to minor closures in relation to passenger services and passenger networks so that all such closures would have to be dealt with under the standard closure arrangements as is currently the case. I beg to move.

Earl Howe

Despite the noble Baroness's clear explanation of the amendments, I am sorry to say that I have real difficulty with them. Their effect would be to apply the closure procedures to the discontinuance of passenger services on any stretch of line regardless of how small that stretch was and regardless of whether the service was re-routed such that the closure was barely discernible to passengers.

The definition of a minor closure in Clauses 32(9) and 33(5) ensures that a proposed closure of a service can be treated as a minor closure only if it involves a stretch of line on which there is no station and for which there is an alternative route which does not involve an additional change of train or any significant increase in journey time. It follows that minor closures can only be of little, if any, consequence to the passengers using the service in question. That is a point I stress. I put it to the noble Baroness that her fears are misplaced.

It cannot be right that such minor closures need to be subject to the full weight of the same closure procedure as would apply to the proposed closure of a much more substantial line. A minor closure will have to be certified by the regulator. That is an additional safeguard as the regulator will have to decide in any event on closure were the full closure procedure to apply. There is no question of the regulator's decision being arbitrary. The definitions by which he is bound are very tight.

I hope that in the light of what I have said, the noble Baroness will be content to think again and will not press the amendments.

Baroness Stedman

I am grateful to the noble Earl for that reply. This is a complicated issue which stretches over two or three clauses. I believe that I am satisfied with the Minister's reply but I should like an opportunity to read it again in Hansard. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Earl Howe moved Amendment No. 62A: Page 37, line 27, at end insert ("or which are provided on an experimental basis, for the purposes of section 56A of the Transport Act 1962;").

The noble Earl said: In moving this amendment I shall speak also to Amendments Nos. 62B, 71B, 71C, 78A, 84J, 101A, 107A to 107C, 108A and 129. These amendments need not detain us long. They simply tie up one or two loose ends.

The main amendment is Amendment No. 107B. Construction of some new railways—for example, the Midland Metro—was authorised by local Acts. Some of those Acts sensibly contained provision to the effect that closure of the existing line while the new railway was built over it was not to be subject to the existing closure provisions in Section 56 of the Transport Act 1962. The provisions of Amendment No. 107B preserve that exclusion from statutory closure procedures by providing that the new closure procedures in Clauses 32 and 33 and the alternative closure procedures set out in Schedule 4 will not apply where Section 56 of the 1962 Act has been disapplied by any enactment. Amendment No. 107A is a consequential amendment. Amendments Nos. 107C and 108A provide that "railway" has its wider meaning (set out in Clause 74(2)) for the purpose of the alternative closure procedure in Schedule 4 so that certain tram services can be covered, as at present.

Amendments Nos. 62A and 71B exclude from the new closure procedure in Clauses 32 and 33 respectively existing BR "experimental services". As many Members of the Committee will be aware, those services are commonly ones serving new stations along an existing line. They are not currently subject to the full closure procedure which applies to normal BR services. Amendments Nos. 62A and 71B tie up two loose ends: they continue to disapply the full closure procedures to existing BR experimental services and they bring such services into line with the exclusions already in Clauses 32(2) and 33(2) for new experimental services designated by the franchising di rector.

Amendments Nos. 101A and 78A are technical amendments and if can assure the Committee that they do not affect the substance of the new closure procedures. Similarly, the remaining amendments in this group are simply drafting amendments to ensure consistency of language or consistency of approach. I beg to move.

Lord Clinton-Davis

I could hardly follow what the Minister was saying. I hope that he understood what he was saying. We must reserve our right to return to these complex matters at a later stage if necessary.

On Question, amendment agreed to.

Earl Howe moved Amendment No. 62B: Page 37, line 30, after ("designated") insert ("or which are of a class or description designated").

On Question, amendment agreed to.

11 p.m.

Lord Brabazon of Tara moved Amendment No. 62C: Page 37, line 45, at end insert: ("(4A) In considering that question the Franchising Director shall have regard to the desirability of maintaining facilities which fulfil, or are capable of fulfilling, functions in relation to the carriage of freight by railway and to any increase in the cost of such carriage if the closure were permitted to take effect.").

The noble Lord said: In moving the amendment I shall, with the leave of the Committee, speak also to Amendments Nos. 70, 78B, 90, 90AA and 97A to 97C. I return again to freight on rail—an issue that I think has not been covered in our discussions today. I also have to say that whatever I have in my amendments is not affected by any previous decisions that the Committee may have made during the course of the afternoon.

The aim of the amendments is simple and, in my view, necessary. The clauses in the Bill that we are presently considering lay down an open and transparent procedure for the closure of passenger railway lines. Indeed, the procedure looks more rigorous than that currently in operation. However, I feel that there is one important aspect of the railway industry which that new procedure overlooks and that is what my amendments are directed towards. The rail freight industry has already achieved one important amendment in the other place; namely. to give the regulator the duty to promote the carriage of goods by rail. I am sure that all Members of the Committee welcome that new duty on the regulator. However, r feel that that duty needs reinforcing when considering the issues of closures and that he needs a specific locus to consider the needs of the rail freight industry when considering the merits or demerits of line closures.

Movements of freight, typically, do not follow the main passenger flows. Many are cross-country and many new flows will be focused on the new Channel Tunnel portal rather than concentrated on routes between main centres of population. As such, the track requirements of freight are not the same as those of passenger services. It follows that what may be a minor closure regarding passenger services may have major significance for rail freight. Safeguards for passenger services and lines do not automatically protect rail freight movements.

Members of the Committee will be aware of the long-term decline in the carrying of freight by rail and of the recent losses by the railways of, among other things, oil and cement traffic. In many cases, losses of traffic mean that sections of line become redundant and are then regarded by BR as a liability. Track may be lifted very quickly and 'vital pieces of land disposed of for non-rail uses. In other places the cost of keeping track serviceable under the present regime may become heavy given the limited amount of freight using it. Costs for freight spiral. That then becomes the driving force behind the withdrawal of freight: services, and again track may be lifted or downgraded to passenger running only.

However, there is nothing inevitable about the present decline. Indeed, it is in the freight area that the Government's privatisation policy is likely to have its most substantial success. I am advised that those companies already operating in the private sector of the rail freight industry are expecting liberalisation to deliver substantial economies in rail operations. If that: can be matched with cost-effective provision of the infrastructure, there is no reason why freight on rail should not once again thrive and grow.

We must not allow freight capacity to be cut, freight lines closed and lines capable of' reinstatement: sterilised by ill-considered property disposal. Looking not many years ahead, we shall surely need that capacity if the congestion on our roads and the environmental damage caused by heavy lorries is not to become intolerable. We should not measure the ability of the railway to carry freight on its present. performance, nor should we permit the longer-term potential of the railway to be jeopardised by short-term thinking.

My amendments address three areas. First, the definition of a minor closure is amended such that a closure cannot be a minor closure if there are significant implications for freight. I believe that that closes a serious loophole. Secondly, a duty is imposed on the franchising director, and through him the regulator, to take into account the effect on freight of any proposed passenger closure. That will prevent the absurd and regrettable situation arising whereby a passenger closure may be sanctioned, costs cascaded on to the remaining freight user of the line and the freight service closed as a result or continued only with the help of a government track charges grant. Finally, in the case of a closure which affects only freight, the amendments put into place similar notification and consultation procedures as for passenger closures.

It has been argued by some that Railtrack, or any other facility owner, will not have any reason to close freight facilities which may have a future use and that normal commercial pressures can be relied upon to prevent undesirable closures. Unfortunately I do not believe that this mechanism can be relied upon. We do not yet know what financial regime Railtrack will be working under but we can anticipate that it will be, quite rightly, stringent. Under these circumstances, long-term strategic planning may be a luxury which Railtrack cannot afford.

Furthermore much freight, particularly to start with, may only be making a marginal contribution to Railtrack's costs and consequently there will be only a marginal incentive to accommodate it. There will in particular be no incentive to keep facilities in reserve against future needs. In other words Railtrack's remit to run a cost-effective and efficient railway in the short term may be incompatible with a forward planning government's wish to hold railway capacity in reserve for the future. It is for this reason that these modest safeguards proposed in my amendments are required.

These amendments are not asking that no closures which affect freight or may affect the future development of freight should ever be allowed: what they achieve is, first, a situation where no closure can take effect without the freight implications being considered and, secondly, they give the regulator power to impose conditions before sanctioning a closure. Such conditions might be, for example, that track may be lifted but the formation be left more or less intact and the line of route kept clear. Another condition might be that the line or facility in question should be offered for sale to any private sector purchaser at a negotiated, and preferably nominal, figure for operational use. The amendments do not seek to prescribe the way the regulator may use his powers but without them there are no safeguards against a gradual and irreversible decline in the capacity of the railway to carry goods.

I wish to leave my noble friend in no doubt as to the seriousness I attach to these amendments. I hope very much that he will be minded to accept them or at the very least promise to come back with his own amendments on Report. I beg to move.

Lord Ewing of Kirkford

The temptation at this late hour is to allow these important amendments to pass almost without discussion. However, as the noble Lord, Lord Brabazon, said, we are dealing with one of the most important issues that has been raised today. If we are to get as much road haulage as possible off the roads and on to the railways—that is essential as we move towards the end of this century—and avoid the saturation of our roads with heavy goods vehicles, then we must keep the routes open and available to take that freight when the day comes when we move it from road to rail. I am fairly certain that the Minister will accept that we are moving into a new era with the opening of the Channel Tunnel and with all the possibilities that that creates for the movement of freight in terms of inter-Continental freight. It would be a great tragedy if we missed this one-off opportunity. Once rail networks, and especially freight rail networks are closed, it is almost impossible to have them reopened. One of the saddest sights I have seen over the past few years, particularly in Scotland, has been the regular closure of freight depots, particularly in Leith and in my former constituency of Grangemouth, which were two major rail freight depots. Those are both now practically non-existent. I add my voice to that of the noble Lord, Lord Brabazon, and hope that I can encourage the Minister to take a positive approach to these constructive amendments.

Earl Howe

I know that my noble friend attaches considerable importance to the protection of freight interests in respect of railway closure procedures and I have more than a degree of sympathy with his sentiments for I share his enthusiasm for the development of the rail freight industry in this country. I think I can provide some comfort to my noble friend even if I initially embark on a criticism of his amendments.

However, I cannot share my noble friend's view, as indicated by his amendment, that the way to promote rail freight is to allow it to shelter behind closure procedures designed for the rather different circumstances of the passenger railway and the social obligations associated with loss-making passenger services. That is a fundamental point of which we cannot lose sight.

Like previous governments going back many years, we believe that rail freight should be organised and managed as a strictly commercial business. The environmental benefits of rail should be recognised through specifically-targeted financial assistance and the industry allowed to develop in a deregulated market.

Amendments Nos. 70 and 90 deal with minor closures. In so far as the discontinuance of passenger services is concerned, which is my noble friend's principal worry, the rule is that a minor closure must not affect any individual station on the line in question and that there must be an alternative routing which can be used by trains at no inconvenience to passengers.

My noble friend's worry is that although a closure may not affect a passenger station it may affect a freight siding at a customer's premises. The withdrawal of passenger trains would leave the freight customer to meet the full cost of keeping that particular stretch of track open, thereby jeopardising the whole freight operation.

I am not sure whether my noble friend has any particular freight facilities in mind or has done any research into the likely scale of the problem which he fears. I suggest that his concern seems more theoretical than practical in this instance. I know of no circumstances or localities where freight facilities might be affected in the way he fears.

It is worth reminding the House that Railtrack will have considerable flexibility in determining its charges. It may well be prepared to stand a loss on a small stretch of track used by a freight customer if that customer makes a strong, positive contribution towards the overall cost of the network. Railtrack would be most unlikely to freeze out a customer if that meant throwing good business away with the bad.

The other amendments tabled by my noble friend are much more radical and taken together would amount to the introduction of a complete and detailed closure procedure for freight. They are aimed at preventing any passenger closures which have even a remote effect on freight services and they are equally aimed at preventing closure of freight-only facilities even where there are no passenger interests.

I know that groups representing rail freight interests are worried that the withdrawal of a passenger service can harm a freight service. That would be the case where the passenger service in question was the only remaining such service on a stretch of track, leaving the freight operator to pick up the Rill cost of the infrastructure. If we look carefully at this worry I hope that I can persuade my noble friend that his fears are misplaced.

First, the regulator and the Secretary of State are both under a general duty to promote the use of the railway network for the carriage of goods by rail and will no doubt bear these general duties in mind when taking decisions on closures. Secondly, access agreements between freight customers and Railtrack will be contractually binding for the term of the agreement. It is not open to one party unilaterally to raise prices or withdraw services without the consent of the other. Thirdly, if freight operators are left as the only users of a line after passenger services have gone and access agreements have expired they will be able to apply for a track costs grant to help to meet the track charges. Alternatively, it will be open to Railtrack to apply for a capital grant if major renewal work is required. In both cases there will be an objective assessment of the environmental benefits so that taxpayers can see exactly what their money is buying. That is a more honest way of proceeding than hiding marginal freight flows behind passenger traffic.

I turn briefly to freight-only closures. I should say straightaway that the Government stick firmly to the principle that rail freight is a commercial enterprise which should pay its own way unless there are exceptional circumstances such as the environmental benefits I have just referred to. In cases where freight operators are the only users of a line, then I believe it is only fair that they should pay the full cost of its provision. Negotiations with the owners of the line should be conducted on a wholly commercial basis, without reference to third parties who have no direct financial stake.

However, having said that, I have yet to hear a convincing argument as to why it is felt that Railtrack would wish to squeeze out a freight service unless that service makes a negative contribution to Railtrack's finances overall. Provided freight services cover their genuine avoidable costs, there is no incentive for Railtrack to ditch freight. I am therefore highly sceptical about the oft-cited fear that developers will come along and persuade Railtrack to sell perfectly good bits of infrastructure in order to build supermarkets or whatever, not least because most freight land is hardly suitable for such development.

As I mentioned at the outset, I can understand my noble friend's concern for the rail freight industry. All of us in the Committee share his belief that the industry must be given a chance to shine, and I am convinced that our policies, with the maximum of freedom and the minimum of intervention, are the right way forward.

As I made clear, the Government's views on the commercial independence of the rail freight industry and the need for deregulation have been known for many years. However, I accept that my noble friend has made some important points upon which both I and my colleagues in Government will wish to reflect further. In particular, we shall give some further thought to the powers already available to the Secretary of State, both in the Bill and in existing legislation. I refer my noble friend to Clause 4(4) of the Bill, on guidance to the regulator, and Section 54 of the Transport Act 1962 which allows for a goods closure notification procedure and could be amended under Clause 139 of the Bill to reflect the circumstances of a post-privatisation railway industry.

With those remarks, I hope that my noble friend will be content to withdraw the amendment at this stage.

Lord Brabazon of Tara

I am most grateful to my noble friend for his remarks, in particular those within the past minute when he became friendly, having previously criticised some of my proposals. I am grateful to the noble Lord, Lord Ewing of Kirkford., for his support. He was absolutely right when he said that with the opening of the Channel Tunnel we all hope that a new era will open up for rail freight. I recall, as will the noble Lord, Lord Carmichael, that that is what I said during the passage of the Channel Tunnel legislation, which seems so many years ago. I believe that that is right. Through their desire to promote rail freight—it has been stated by the Secretary of State and there will be a duty upon him and upon the regulator—the Government recognise that that is indeed what we wish to see.

My noble friend criticised my amendment in a number of different ways. In view of the late hour I do not propose to go through what he said. He made up for that criticism to some extent by what he said in the last few sentences of his speech. I shall read what he said with interest. I look forward to examining the specific proposals that he made at the end of his reply. In the meantime, I beg leave to withdraw the amendment. I also give notice that I shall not move the other amendments which are grouped with it.

Amendment, by leave, withdrawn.

Baroness Stedman moved amendment No. 63: Page 38, line 6, after ("publish") insert ("at every station affected and").

The noble Baroness said: This is a large group of amendments and I am afraid that I am responsible for 21 of the amendments in it. However, I shall not make 21 speeches. In moving Amendment No. 63 I shall speak to Amendments Nos. 64 to 68, 72 to 76, 79 to 83 and 85 to 89.

Six amendments apply to Clauses 32, 33, 34 and 35. Amendments Nos. 63, 72, 79 and 85 deal in the different clauses with the closure and the publication of notices. If the franchising director is of the opinion that a proposed closure ought to take effect then he has to publish a notice. It is standard practice at present, though I understand it is not a legal requirement, for British Rail to publish such notices at all railway stations affected by the proposal.

Under Clause 36(10), once a decision has been made on the closure proposal, the regulator is obliged to publish a notice of his decision at every station within the area affected. It is logical that the franchising director should be required to do something similar at the start of the process and these amendments would enshrine that concept in the new legislation.

On Amendments Nos. 64, 73, 80 and 86, the franchising director's notice of closure has to be published for two successive weeks in a local newspaper circulating in the area and in two national newspapers. Currently, British Rail publishes the notices in two local papers. The new proposals will ensure a wider coverage, but the decision to publish in only one local newspaper is felt to be insufficient and inflexible because of the rather less frequent publication of local newspapers and it being necessary in only one.

On Amendments Nos. 65, 74, 81 and 87, the franchising director's closure notice has to contain the addresses of the premises at which a statement of the reasons for the closure can be inspected or from which a copy of that statement can be obtained together with any fees payable for a copy of the statement. Currently, British Rail prepares the equivalent document and supplies it to the transport users consultative committee free of charge. It is invariably made available to objectors free of charge. The payment of a fee by objectors to obtain a copy of the statement is not desirable. It could well deter potential objectors from lodging an objection. The amendments seek to delete any reference to fees from the copies of the franchising director's statement.

On Amendments Nos. 46, 75, 82 and 91, the franchising director's closure notice must contain a statement that objections to the closure may be lodged with the regulator. Under the present legislation, objections are lodged with the relevant transport users consultative committee and they must be in writing. It would be impossible for the regulator or other parties to deal with telephone objections satisfactorily. The amendment is to deal with that.

On Amendments Nos. 67 and 76, the objections must be lodged within a specified period which is not less than six weeks from the date of the last publication of the notice in a national newspaper. Instead of a national newspaper, in Clauses 34 and 35, the local newspaper is specified. I believe that a local newspaper is quite satisfactory and acceptable, but the infrequent publication of some local newspapers means that the dates may have to be extended. It could reduce the effective period for objections by people who become aware of the proposal through their local newspaper. The deletion of "national" in Clauses 32 and 33 would ensure that whether the notice appears last in a national or a local newspaper becomes irrelevant and everyone would have six weeks to object.

Finally, on Amendments Nos. 68, 83 and 89, the franchising director's statement of the reasons for the closure may consist of, or include, the operator's reason for proposing the closure, with or without other reasons of the franchising director. The amendment seeks to ensure that the statement, which will be important to objectors in preparing their case, includes both the operator's and the franchising director's reasons for proposing closure. I believe it is entirely appropriate that objectors have a clear idea of the case which they may have to answer. I beg to move.

Earl Howe

I shall try to be brief, although it is difficult with this number of amendments. The amendments in this grouping are detailed amendments concerning the notice that the franchising director is required to publish if he considers a closure proposal should be allowed to take effect, and other related matters.

Amendments Nos. 63, 72, 79 and 85 would require the notice to be published at every station affected by a closure procedure. BR at present displays notices of proposed closures at stations, though there is no statutory requirement to do so. I have no difficulty with the intent of these amendments, but I do not believe that they are necessary. The publication requirements in the Bill are minimums and the franchising director is already required to publish his notices in national and local newspapers and in any other manner he thinks appropriate.

Amendments Nos. 64, 73, 80 and 86 would require the notice to be published in at least one local newspaper, in addition to two national newspapers. These amendments would add little to the Bill. The present formulation is, again, already effectively a minimum requirement, since the franchising director is empowered also to publish the notice, in such other manner as it appears to him to be appropriate". Amendments Nos. 65, 74, 81 and 87 are apparently intended to remove the power of the franchising director to charge for copies of the statement of reasons for the proposed closure. I think it is only reasonable to permit charging if the charge is not obligatory. The level of any charge would of course have to be reasonable, perhaps to recover the cost of making copies available.

Amendments Nos. 66, 75, 82 and 88 would require that any objection to the proposed closure must be in writing. Again, this would add little to the Bill. Any serious objector would surely object in writing.

Amendments Nos. 67 and 76 would alter the start date of the period within which objections must be lodged, to begin with the date of last publication in any newspaper.

Government Amendments Nos. 67A and 76A, to which I shall refer in a moment, have much the same effect in making the start date the date of publication in the local newspaper, which we expect would be the latest date, and so give the longest period for the lodging of objections.

Amendments Nos. 68, 83 and 89 would require the statement of reasons for the proposed closure to include the operator's reasons rather than, as drafted, permit their inclusion. I do not think that that would be right. The operator will have his own reasons for wanting to withdraw. Those may or may not be relevant to the franchising director's decision to invoke the closure procedures. It is the franchising director's reasons for proposing closure that are important and should be made public. If the franchising director wishes to pray in aid some of the operator's reasons, then he may, but he should not be obliged to. They may be completely immaterial.

I turn briefly to the government amendments in this grouping. Amendment No. 64A brings Clause 32 into line with the other closure clauses—for example, Causes 33 to 35. It is not controversial; it simply recognises the point that, when a rail user sees a notice of a proposed closure, he wants to know when that closure is due to take effect.

I can assure the Committee that Amendments Nos. 64B, 68A, 70F, 76B, 77A and 86A, all of which are in this grouping, are all technical and stylistic amendments which do not affect the substance of the provisions but which do improve the drafting of the Bill.

I mentioned a moment ago Amendments Nos. 67A and 76A. There may be some cases where a user of a service or facility which has been proposed for closure may only read a local newspaper which is published weekly or even fortnightly. We want to ensure that such a person still has the full six weeks within which to object to the regulator. These amendments therefore provide for the six-week period to begin on the date of publication of a proposed closure in a local newspaper, not a national newspaper. For the reasons I have stated, I cannot support the noble Baroness's amendments, but I commend my own to the Committee.

Baroness Stedman

I am grateful to the Minister for his explanation. I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendment No. 64 not moved.]

Viscount Goschen moved Amendments Nos. 64A and 64B: Page 38, line I I, leave out from ("which"') to end of line 12 and insert ("it is proposed that the closure will take effect,"). Page 38, line 14, leave out ("the Franchising Director") and insert ("him").

The noble Viscount said: I beg to move these amendments en bloc.

On Question, amendments agreed to.

[Amendments Nos. 65 to 67 not moved.]

Viscount Goschen moved Amendment No. 67A: Page 38, line 22, leave out ("national") and insert ("local").

On Question, amendment agreed to.

[Amendment No. 68 not moved.]

Viscount Goschen moved Amendment No. 68A: Page 38, line 41, at end insert: (""the area affected" means the area in which is situated the station or, as the case may be the, line mentioned in subsection (1) above;").

On Question, amendment agreed to.

[Amendments Nos. 69 and 70 not moved.]

Viscount Goschen

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.