HL Deb 12 June 1997 vol 580 cc988-1025

3.54 p.m.

Lord Geddes rose to move, That this House take note of the Report of the European Communities Committee on Community railway strategy (7th Report, Session 1996–97, HL Paper 46).

The noble Lord said: My Lords, before outlining the basis of our report and the conclusions that the committee reached, perhaps I may congratulate the Minister most sincerely on her appointment. The noble Baroness brings with her a wealth of knowledge and experience of transport matters. It is an area in which too, take a great interest, and doubtless we shall be looking at each other across the Floor of the House on many occasions. I congratulate her.

I thank also most sincerely—it is traditional to do so on these occasions, but I do it with great sincerity—the technical adviser who assisted Sub-Committee B, Professor Andrew Evans of the University of London Centre for Transport Studies, our Clerk. Doctor Andrew Mylne, and his secretary, Jane Sanders, for the tremendous amount of work they put in during our discussions and in compiling the report. Finally, I thank my colleagues on Sub-Committee B. This was the first occasion upon which I had had the honour of chairing the committee, although I had been a member of it for some years. Without their support, I could not have got through this report. I thank them.

The report is based upon the Commission's White Paper published in July 1996 with the principal aim to introduce market forces to the rail sector and to allow rail to compete more effectively with other transport modes. The measures within the White Paper included greater financial transparency and relief of what is described as historic debt; the separation of infrastructure management from operations; the greater integration of national systems; the promotion of—I confess I hate this word—inter-operability; and the establishment of rail freight freeways to encourage the movement of freight from road to rail.

The rail sector within the EU remains largely state-controlled and organised on a national basis. Railways are widely regarded as national assets and as providing a public service as well as a commercial one. The White Paper upon which our report was based attempts to balance the benefits of a more commercial approach with protection for the public service element. Thus it proposes open access for freight and international passenger services only, but not for all domestic passenger services, which are dependent upon subsidy.

Although the key areas in the White Paper are not new—indeed the committee reported on similar proposals in 1990—they have been taken up enthusiastically by Commissioner Kinnock. In evidence to the committee, for which the committee was extremely grateful, Mr. Kinnock spoke passionately about the need for change if rail is to survive as a major transport mode.

As will be seen from our report, the committee took evidence from, among others, Mr. Kinnock and Commission officials; John Watts MP, then Minister for railways and roads; Mr. John Swift QC, the Rail Regulator; Railtrack; SNCF and the Community of European Railways; Mr. Jimmy Knapp of the RMT; and from—I apologise for the mouthful that is coming up—English, Welsh and Scottish Railway on the freight side and the Great North Eastern Railway on the passenger side.

The committee recognised that the UK rail sector is considerably ahead of the railways of most other member states in terms of liberalisation. Only Sweden has also separated infrastructure and operations, although in its case with one national operator. So the Commission's proposals will have a much greater impact, if implemented, outside the UK than inside it. However, UK witnesses were interested, particularly the freight operators, who were looking for better access to other networks.

The report does not consider the merits of rail privatisation. The Commission does not, and indeed cannot, advocate privatisation in any case. But it is notable that the previous Government linked their support for much of the White Paper proposals to their advocacy of privatisation. When the Minister replies, will she explain Her Majesty's Government's attitude in that context, and to what extent she expects it to differ from that of the previous Government?

The committee agreed with the case for change and supported much in the White Paper, although, as we said, we realised that it would require a concerted political will to achieve such change. Indeed, it might take as much as a generation to do so. We supported the introduction of market forces, but emphasised that rail will continue to rely on public subsidy for passenger services. Therefore, we considered it essential to introduce transparency to ensure that the area where rail operates more commercially is clearly distinguished from the area which is funded by the taxpayers. Where services are uneconomic, the state should offer exclusive concessions to particular operators. However, those concessions should be open initially to competitive tender, including from companies in other member states.

The committee disagreed with the Commission on the Commission's advocacy of separation of infrastructure and operations. Indeed, financial separation is already required under an earlier Community directive. We were of the opinion—and I emphasise that word—that such separation of infrastructure and operations was not necessary per se. It might be desirable; it might not be desirable. But it did not have to take place provided that there was financial transparency and everyone could see exactly what was happening.

Our conclusion was contested perhaps by my noble friend in person, but certainly by the previous Government. I should be interested to know from the Minister the view of the present Government in this context. Our report very strongly advocates a Community regulatory authority. The White Paper proposed an agency, but we went further than that and stated that if there was to be any hope of achieving inter-operability—of achieving a proper exchange within the European Community on railways—there had to be a regulatory authority which had the ability and strength to knock heads together. Without that—I was going to use slightly stronger language, which within the Chamber I shall moderate—we did not see how such integration and inter-operability could conceivably take place.

Again, I suggest that the previous Government were lukewarm on our advocacy of a regulatory authority. They suggested that a European-wide regulator should be established only if existing powers were shown to he inadequate. Will the Minister comment on that and say to what extent this Government's views vary from those of their predecessors?

The second area where we disagreed with the previous Government was with regard to the uniform cut-off date for defining "historic debt". The White Paper advocated a specific date of 1st January 1993. The committee was highly sceptical about that, given that some member states have run up huge debts by buying expensive new rolling stock, while Britain, for instance, had very little debt because of lower investment. A uniform cut-off would give an unfair advantage in a single market to those who had bought high, bought recently and had more modern stock. The previous Government disagreed, saying that a case-by-case approach would be too slow and would benefit those member states whose cases were considered first. Will the Minister comment on that?

Much of the White Paper dealt with freight issues. I strongly suspect that the noble Lord, Lord Berkeley, will concentrate on that issue. The Commission was keen to see early progress on getting more international freight onto rail. Our committee was impressed by this approach and the imaginative proposal for rail freight freeways. It is ridiculous that long distance freight takes so long. Within the European Union, rail freight travels at an average speed of 10 m.p.h. Of course, when it is moving it is faster than that, but statistically that is the speed at which it travels from point A to point B. We particularly welcomed the pragmatic approach of encouraging railway companies to set up freeways on a voluntary basis rather than proceeding by legislation. Can the Minister say what progress is being made and to what extent, and how, the present Government are supporting the initiative?

As regards integration and inter-operability, there are formidable practical obstacles in moving towards an integrated European rail network. The most obvious are the physical factors, such as differences in the gauge of the track or the electric voltage. There are also operational obstacles such as the recognition of train crew qualifications and border formalities. Because rolling stock specification varies from country to country, train operators cannot benefit from a single market when buying new stock. UK freight operators found the restricted British loading gauge a disadvantage. But they are also disadvantaged vis-à-vis road by being held up for hours at a time at frontiers. The report calls for a pragmatic, case-by-case approach. concentrating on ways to make different systems work together rather than imposing a single uniform system at a high cost. Will the Minister advise us of the progress that has been made or that she expects to be made in that context?

Our report also calls for harmonisation in the area of safety appraisal, with oversight by an independent, Community-wide body. Obviously safety is a very important issue, but there is a danger that rail is disadvantaged in the competition with road by safety standards much higher than those applicable in the road sector. We did not want to diminish the importance of safety, but we were of the opinion that sometimes the requirements went more than a little over the top. The challenge is to make rail more competitive without lowering safety standards.

As regards employment, we recognise that restructuring European railways will inevitably involve significant job losses. But we also recognise the greater danger of a continuing decline of the sector if the nettle is not grasped. Mr. Kinnock, in evidence to the Transport Committee of another place, made a most interesting remark. He stated: The choice now is between the lingering demise of rail, which will be cataclysmic for the number of jobs involved, and the possibility of progress through change".

We endorse that comment most strongly. We agreed that jobs were best protected by restructuring and we supported the use of the Community Social Fund to mitigate the impact on workers. Again, I am sorry to say that the previous Government were not at all keen on that, stating that it could let off the hook the member states which had not provided for their own rail employees. Will the Minister comment on that?

The Deputy Prime Minister recently announced the development of an integrated transport policy for the UK. Does the Minister see Labour's plans for rail in Britain as consistent with the Commission's thinking, as developed by a former Labour leader?

In summary, the report was on the Commission's White Paper. It was only that; and we described it as a fairly "green" White Paper. The next stage must be towards specific proposals. The committee hopes that Her Majesty's Government are committed to making this a priority for the UK presidency in the first half of 1998. I beg to move.

Moved, That this House take note of the Report of the European Communities Committee on Community Railway Strategy (7th Report, Session 1996–97, HL Paper 46).—(Lord Geddes.)

4.8 p.m.

Lord Berkeley

My Lords, as a comparatively new member of the committee, I wish to be the first to congratulate the noble Lord, Lord Geddes, on his wise and business-like chairing of the committee, interspersed with much good humour, and on his excellent summary of the sub-committee's report. Perhaps I may first declare an interest as chairman of the Rail Freight Group. As the noble Lord suggested, today I shall concentrate mainly on freight.

It is interesting to reflect that the committee began hearing evidence nine months ago. Since then, we have had a change of government. However, it will also be interesting to see how much change there has been in the intervening period in the attitude to the report of the railways of other member states and how they intend to implement it. I shall return to that matter later. I certainly welcome not only the White Paper but also the committee's report as major contributions to creating competitiveness on the railways and to helping to solve the congestion problem of congestion on the roads in an environmentally friendly manner.

I should like to look at the history of some of the railways, to some extent in this country but mainly on the Continent. It is true that they were probably built as a symbol of the state carrying out its duty to transport freight and passengers and to generate economic movement around the country. As the noble Lord, Lord Geddes, said, there has been enormous investment—the TGV in France and the ICE in Germany. But that has been done on extremely nationalistic lines with very poor or under-used cross-frontier arrangements for both passengers and freight. The UK has invested less and probably closed more lines. The whole of Europe has spent the past 20 years building roads. The railways have ended up with enormous debts while there is virtually no debt in respect of roads. The road network throughout Europe is becoming clogged up. There is an inflexible rail system with appalling links between many member states. That is what has driven the Commission to issue the White Paper.

Where are we now in terms of freight? Continental railways carry a much higher proportion of freight, measured in tonnes per kilometre, than we do in this country. It is something like 15 per cent. in France, 21 per cent. in Germany and 6 per cent. in this country. We are in a situation now where money has run out, for whatever reason, for the building of roads and money has run out also for the building of railways. Therefore, it is good that the White Paper sets out a framework within which the railways should be restructured; and it is not a prescriptive framework. The challenge must be to create an environment in which the railways can achieve the growth which we all want in the market place on a basis of a level playing field with other modes of transport.

I wish to discuss two points in particular in the committee's report: one is rail freight freeways; and the other is to add something to what the noble Lord, Lord Geddes, said about technical inter-operability and safety.

In a personal capacity with the Rail Freight Group, I am involved in the development of a rail freight freeway from London to Hungary—a place called Sopron. Perhaps I may share some of the challenges we face and the progress we are making in that regard. What has emerged is that there is very little connection between the passenger service and the freight service. They have different needs and customers. They meet on the track usually only when they are getting in the way of each other. Therefore, there will always be a debate as to who wins and who has priority. That is one of the challenges that we must address.

Of course, in the UK, the railways are privatised. There are four operators of rail freight in this country. EWS is the largest but there are also Freightliner, which concentrates on containers, and two others. They provide a transport service to the end user which includes rail. In the industry there are also terminal providers, providers of road freight to the terminals, wagon and equipment providers, road haulage connections and so on. It is a long logistical chain. It is not just a question of rail versus road. It is very important to remember that.

On the Continent, there are privately owned and state owned trains but the state railways usually provide the traction and the drivers. As the noble Lord, Lord Geddes, said, the average speed is quite abysmal. Freight is given a fairly low priority on many routes. That may be because of lack of drivers, timetabling or frontier controls. It is interesting that the timetabling between member states is often non-existent. Sometimes it takes about six months to get a new train running between member states. The first rail freight freeway from Rotterdam to Milan has easily found a path for half a dozen more trains per day in each direction simply because people have started to talk to each other. There have been no new lines. There has been merely an exchange of ideas and the working out of priorities.

TERFF—which is a terrible acronym for Trans Europe Rail Freight Freeways—is not seeking new lines but more efficient use of existing ones and the removal of bureaucracy which is holding up growth. That is terribly important. It seeks to create new rail freight flows which can compete with roads in terms of time, price, reliability and customer service. It seeks to do that by creating a new flow or by increasing an existing one. For example, 40 per cent. of the traffic from UK to Italy goes by rail while none of the traffic from UK to Germany goes by rail. I shall return to that point.

For me, the ultimate objective is a train that goes from London to Hungary non-stop, with two drivers, a bunk and cooking and toilet facilities. The train may be diesel or it may be electric. That is how we shall compete, and that could be achieved.

The sub-committee welcomed the freight freeways. SNCF expressed concern but since it gave evidence I believe that its attitude has modified. It cannot call it a freeway but it calls it a freightway. It is quite happy to participate so long as it provides the locomotives and drivers, perhaps on a subcontractual basis. That is a beginning.

There is also progress from the Community of European Railways, which is a grouping of all the European railways. It has produced a report, which it sent to Mr. Neil Kinnock last month. That is very positive and all the railways to which I have referred signed up. That is a good basis for moving forward.

How are we to achieve those freeways? What are the pitfalls? First, if an operator wishes to send a train, he should be able to get an answer to the question of whether there is a train path, how much it will cost and how long it will take within 24 hours. As I have said, it sometimes takes several months. In fact, this morning I heard that one such request to Germany took six months. That must change. Timetables must exist for the train to follow, with connections. Frontier controls must change. We must remove the delay involved in collecting the tail lights from the back of trains. There are a great many frontier controls and immigration controls in relation to the drivers. There are custom controls, especially in this country. There is a change of locomotive at every change of voltage. We must be able to make improvements in that regard. This country is one of the worst offenders.

Costs are the biggest problem. If we add up the infrastructure costs all the way from London to Hungary we shall probably find, as we may do in the autumn, that the costs, to which must be added traction and rolling stock costs, make rail totally uncompetitive with road. That is because each member state has a different means of charging. In Holland, there will be no charge for freight trains for another few years. In Germany, there is a price list and if you ask the Germans to negotiate they say, "No, that is the price and we are sticking to it. We shall not discuss it". As I have said previously, charges for using the Channel Tunnel are higher for rail freight than for road freight. There is an historic reason for that and I do not blame anyone, but in the next few months perhaps the Minister will find time to address that issue. It is a very complicated problem. But the fact remains that for the end customer it is three times more expensive to take a rail container through the tunnel than it is a road container. I suggest that that is hardly in line with the present Government's policies.

The operators are also putting together a market study to see how much traffic there will be. There are other freight freeways between Rotterdam and Milan and between Germany and Barcelona. The railways are very enthusiastic about it but it needs governments and the European institutions to provide support and pressure on member states to accept the freeways, market pricing and some priorities. That is a beginning but we have a long way to go.

I turn briefly to the interoperability and safety issues. The sub-committee noted the very different systems to which the noble Lord, Lord Geddes, referred. Paragraph 97 of the report mentions the problem of frontier procedures and the need to harmonise standards. I was particularly struck by the previous Government's response to that where they say that, technical and administrative provision must be subject to cost/benefit and only laid down to the extent necessary". In a recent conference speech, Richard Hope, who is a well-known railway journalist and former adviser to the Select Committee on Transport in another place. quoted Roger Freeman, the former Minister for Public Transport, in 1990 saying that, on the roads you actually measure the safety benefits in cash terms: on railways, if technology is available to improve safety, it should be done". I hope that my noble friend the Minister can reassure us that some of this will change. If the railways are really to compete on a level playing field with road, we need safety; but we also need affordable safety, otherwise they will close down. For example, with South West Trains, half the problem was that the drivers were learning the routes and took several weeks to do so. However, there are 32 million car drivers who do not even have to learn any road routes before they go anywhere.

I should like to conclude on the complexity of the matter. I believe that it is illustrated most effectively by the European night sleeper services which have not yet started through the Channel Tunnel and are owned by four railway companies. Each railway specified its wish list. It is now so expensive to operate that, even with the several hundred million pounds' worth of government money that went into the project, it is unlikely to enter service at all. That is a scandalous waste of public money. I hope that my noble friend the Minister will be able to inform your Lordships as to what might be the future of that project. Even if it is written off, I should like to see those trains run rather than sitting in a siding as they are at present.

I believe that the report has been a most useful exercise. I strongly welcome the policy of the new Government towards public transport and towards Europe and its partner member states. I also welcome the constructive attitude to European matters, offering advice, leadership and, occasionally, a little humility. That also applies to railways. I look forward to hearing my noble friend's reply.

4.21 p.m.

Lord Methuen

My Lords, I feel somewhat daunted following the noble Lord, Lord Berkeley, with his extensive practical experience. I am only an amateur in the business. I should also like to thank the noble Lord, Lord Geddes, for introducing the debate on the report on European Community railway strategy. I congratulate him on his very able chairmanship of our committee. I have just a few points to make.

The evidence presented to the committee showed European railways to be in a very critical state with a steadily declining share of the market, especially in freight. Drastic steps such as those proposed in the strategy will be required to revitalise the railways before they suffer a fatal decline. I am in complete agreement with the policy of support for rail transport. I am appalled at the destruction of our environment by heavy goods vehicles while railway lines, which could be used for much of the bulk mineral traffic carried in these vehicles, lie idle. I suspect that the situation elsewhere in Europe is similar to that which pertains in Derbyshire with which I am particularly familiar. I know of at least three railway lines in Derbyshire lying idle and rusting. All the traffic is on the road.

The short distance of some 60 kilometres travelled by the average load in the United Kingdom probably limits the scope of what can be done, except in the case of trainload freight. Hence we must support the programme of rail freight freeways which are beginning to become a reality in the UK and elsewhere in Europe. I understand that the longest of these is from the North Sea ports to Moscow—a distance of some 1,400 miles—with a break of gauge at the Russian border.

Both the strategy and our report comment on the harmonisation of Community railway systems. A number of major problems make this impractical and unlikely to be cost effective, as already mentioned. One problem with all European through rail routes is the diverse nature of the traction supply on electrified tracks. The capacity to accept four or five systems of electrical power may be required on international routes; this leads to great complexity. It is not cost effective to convert a complete railway system to the standard of 25,000 volts at 50 hertz, which is the preferred methodology nowadays. We have done it in the UK. The London, Tilbury and Southend line was converted from a DC (direct current) system to an alternating current. But that is a very small item compared, for example, with converting the whole of Austria with its unusual frequency and voltage.

International traffic to and from the UK is limited by our loading gauge being substantially smaller than that in Europe. We do not even have a common European track gauge. Spain uses a broad gauge track which requires the axles of rolling stock to be changed at border stations. All that is compounded by the delays of Customs and driver checks which result in rail freight taking twice as long as that carried in a lorry to travel from the UK to Italy. Rail freight freeways should go some way towards restoring the balance, providing that the cost can be met as described by the noble Lord, Lord Berkeley.

The noble Lord, Lord Geddes, outlined the separation of infrastructure from operations. I am not convinced of the necessity for this. Prior to the formation of British Rail in 1948, the railway companies used each other's lines with legally enforced running powers and were able to invest in infrastructure to meet their traffic needs. Examples were the extensive quadrupling of mainlines to accommodate both freight and passenger traffic without interference of one with the other, and the avoiding lines built by the Great Western Railway to speed up passenger traffic by avoiding certain stations. That took place both on West Country lines and in South Wales. It is a type of investment we do not see at present. It is, however, what is needed on the West Coast mainline and in the strategy for Europe. It is essential that pinch points which interfere with the interaction of passenger and freight traffic are examined and adequate investment provided to overcome the problem.

I am not impressed by aspects of competition between UK train operating companies. The matter is perhaps a little wide of our report. As one of our witnesses said, the real competition is not between rail companies but between road and rail. Yet the Community rail strategy is to be modelled largely upon what we have done in this country. We are apparently ahead of the field. I do not believe that we have enough experience to be clear about the advantages and disadvantages of our approach. To date, we have seen Railtrack's under investment in infrastructure and the appalling performance of South West Trains this spring. The general reduction in manpower, already evident since privatisation in the UK, will be repeated all over Europe, and especially in France.

One paramount essential is safety. The safety record of British railways has been built up over the past 150 years and is second to none. I believe that the road traffic record in no way approaches the same standards, and that it cannot do so due to the inherent differences between the two modes of transport. Those standards must be maintained in the proposed strategy while remaining cost justifiable. I hope that I do not sound too pessimistic. I am a keen supporter of railways from environmental and social points of view. I trust that we can still revitalise the European Community railways and I look forward to hearing the Minister's comments.

4.27 p.m.

The Lord Bishop of Hereford

My Lords, I too congratulate the noble Baroness on her appointment to this post. I recall, appropriately, that I first met the noble Baroness on a railway station when she was a very young worker for Shelter and I had inveigled her to address the massed divisions of senior boys at Eton—a far more intimidating task, I believe, than any she will ever face in this Chamber. I also congratulate the noble Lord, Lord Geddes, on the work of the Select Committee.

I should like to give a warm welcome to the Commission's White Paper and to the careful and thorough work undertaken by the Select Committee. The question of developing a European railway strategy needs urgent attention. Indeed, there is a reference on page 9 of the House of Lords paper to the statement of Commissioner Kinnock that, the survival of rail is at stake", that it may face a "lingering demise" unless vigorous and co-ordinated action is taken. That may sound somewhat alarmist, even apocalyptic—and, indeed, not altogether convincing—in the light of the enormous sums being invested by most European railway administrations, but there is certainly no room for complacency.

Members of your Lordships' House may wonder why someone from these Benches is taking part in today's debate. It is a highly technical debate and one about which most bishops might not be expected to know very much. I do, indeed, speak with the greatest diffidence. I do so because I have a particular personal interest in the subject—an entirely amateur interest; but, more importantly, because I believe that transport strategy should be driven by a clear ethical imperative; namely, the protection of the environment, in the widest possible sense of the word, from the ever-increasing impact of road traffic. I believe it to be the case that both the Commission's White Paper and the Select Committee's report underestimate the potential for transfer of traffic from road to rail.

I hope that I may for a moment be parochial and anecdotal. Last Saturday I was invited to launch in Hereford the local Agenda 21 action programme agreed by five existing local authorities and one shadow unitary authority under the sharp and arresting title of WHAM?—What Happens After Me? It was a serious attempt to pick up the Agenda 21 issues which emerged from the Rio Conference five years ago and to put in place practical policies for environmental protection at every level, encouraging vigorous action by everyone from the largest commercial and industrial firms to the individual citizen.

The relevance of that local initiative to today's debate lies in the answers given by participants to the question about what they most disliked at present about living in Herefordshire. There were lots of things they liked but the thing they overwhelmingly disliked the most was the relentless increase in road traffic, both lorries and cars. Those answers reveal one aspect of what I believe is a rapidly rising sense of frustration, impatience and even anger at the dominance of the road culture.

I am saddened to see the relatively scant attention paid in the Select Committee report to environmental issues, summed up in two rather discouraging paragraphs on page 12. I believe we need to do much better than that. There are specific ways in which government action could make a decisive difference to the relative volumes of freight traffic conveyed by road and by rail.

In particular, I welcome the point well made by the Rail Freight Group about the need to impose the full costs of road use on road hauliers so that there is a more nearly level playing field in which rail can compete with road. That is dealt with at question 8 on page 2 of the Minutes of Evidence which points out that not only do Vehicle Excise Duty and road tax not cover such costs as policing and dealing with accidents, but they wholly ignore the costs of environmental damage caused by heavy road traffic. That seems to me to be the first priority for government action.

The second is seemingly a much more minor matter but I believe it is also important. It requires a brief resume of the recent history of rail freight operations in this country. Twenty years ago British Rail had a monolithic freight operation, not notable for dynamic or imaginative management. It was the dinosaur, if you like, of the transport industry. In the 1980s there came about a change which was described by the unlovely word "sectorisation" in which the haulage of different commodities was placed under separate management: coal, steel, roadstone, petrochemicals and so on. The emphasis was strongly on block trains of the same commodity. Some Members of your Lordships' House may remember freight locomotives carrying quaint pictograms indicating the traffic they were supposed to be hauling, for example black diamonds indicated coal.

Alongside the block trains, the rail freight operators' pride and joy were two other forms of rail freight: Speedlink for wagonload traffic, small consignments, and Freightliner—which has already been mentioned—for inter-modal traffic. Containers which arrived by sea or by lorry at a Freightliner terminal were transhipped onto a Freightliner block train and then transhipped again at the other end. It was fine for some long runs and for traffic in containers but it was not widely usable by most manufacturers and distributors for most of their journeys. Those people needed Speedlink, but Speedlink came to a sticky end after losing much money.

In the run-up to privatisation came further reorganisation. There was Loadhaul, Mainline, Transrail, Rail Express Services, Rail Freight Distribution and so on. The process was not exactly calculated to encourage good management or vigorous marketing. In the end, in February last year, ownership of most of these operations passed, as we have heard, to the American company, Wisconsin Central, now renamed English, Welsh and Scottish Railway (EWS) whose evidence was central to the Select Committee's work. This year EWS also acquired Rail Freight Distribution, the international arm of rail freight, operating conventional and inter-modal traffic through the Channel Tunnel, our vital link into the European rail system.

I think that many people held their breath and wondered what this American company would do. It claimed that it would triple rail's share of freight in Britain from the pitiful 6 per cent. we have already heard mentioned this afternoon. Many people were incredulous. However, the signs so far are extremely encouraging. I hope I may identify four things which seem to me to be grounds for hope and encouragement. The first is the revolution in managerial attitudes displayed by EWS—its focus on the customer, and the energetic and imaginative marketing of rail freight. I hold no brief for the company but I admire what has already been achieved and what the company's chairman. Mr. Ed Burkhardt, aims to do. A propos the EWS acquisition of Rail Freight Distribution—which happened after the Select Committee took evidence—which took place despite the fact that RFD was losing £1 million a week, Mr. Burkhardt said: It is a can of worms, and EWS is either daft or incredibly brave in attempting its rescue. But we believe that properly operated international freight services can tap into a huge market where today's rail share is minuscule. I would like to see the railways treating their customers in a kinder. gentler manner". Those are the words of a hard-nosed American entrepreneur! He continued: This is not rocket science. We just have to provide dependable services with fast schedules. and be convenient to use". In the same speech at the Euromodal conference in Paris in March of this year he said: We have met our European partners. They recognise that the railway culture must change towards a higher level of customer orientation. I think it is our role to hasten reform on a collaborative basis". That statement picks up a great deal that was said to the Select Committee—some of it said rather anxiously—about co-operation with European partners. Therefore the first positive point is that we need much better management and an attitude of total commitment to expanding rail freight in the UK and in mainland Europe.

The second point is that we need confident investment in the rail freight business. EWS has just ordered 250 new locomotives—which are sadly to be built in Canada. although in London, Ontario—and it plans to set up a wagon manufacturing business in Britain turning out 500 new wagons a year. That does not sound to me like an industry in terminal decline.

The third point brings me back, after this historical digression, to the second area where I believe government action is needed. It relates to wagonload traffic. Despite the earlier collapse of Speedlink, there were still railway managers who believed in wagonload traffic. It was greatly to the credit of the short-lived Transrail company that it reintroduced a wagonload system called Enterprise. This now has 250 terminals served daily. They are not massive installations like Freightliner terminals but for the most part modest sidings. EWS is admirably fitted to build on that business. Some 80 per cent. of Wisconsin Central's freight business in the USA consists of wagonload traffic. That is an incredible figure in European terms, but it explains, at least in part, why EWS is so confident of vastly increasing the share taken by this Cinderella of rail freight. I beg to differ with the noble Lord, Lord Methuen, about that. I believe that there is a future in wagonload traffic, not just in block trains.

The importance of all this is that the rail freight business will really make an impact on road traffic at the wagonload level as regards supermarket deliveries and small factories' output which at present travel exclusively by road—the traffic that so irritates the people of Herefordshire. However, the terminals must be in place. The connections with rail must be in place. There was, and still is, a provision called Section 8 grants, which help greatly with the cost of connecting business premises to the rail network. That system functioned well when Speedlink was operating but of course it was no use when the wagonload facility was withdrawn. It is referred to at question 2 in the Minutes of Evidence where Julia Clarke states: we have a system of support for freight through freight facilities grants and track access grants, and we certainly do not want to see that ruled out because of European legislation". Indeed we do not. In fact we want much more positive encouragement of such grants so that the potential for transfer from road to rail is enormously increased. The environmental argument in favour of this policy is, I believe, overwhelmingly convincing.

Fourthly, and finally, another most welcome development since the Select Committee took its evidence, and another key to a major expansion of rail freight traffic, has been the negotiation of a track access agreement between EWS and Railtrack, giving a fixed annual charge for track access over the next five years. No longer will the complicated and discouraging process explained at question 61 be a deterrent for rail freight operation.

The environmental imperative is of great importance. I hope and believe that the Minister will be able to respond encouragingly on the two matters I have identified as requiring government action: first, the accurate measurement and charging of the environmental and other at present unquantified costs to road transport and the creation of a more equitable basis for competition between road and rail; and, secondly, the active encouragement of wagonload, or less-than-block train, traffic by offering further help in making rail accessible to manufacturers and distributors.

There is much else I could say. Yes, we need a European regulatory agency. We should certainly not have a uniform cut-off point for debt. Yes, we want rail freight freeways, and so on. But I have already trespassed far too long on your Lordships' time—far longer than any amateur has a right to do.

4.41 p.m.

Lord Cadman

My Lords, I feel that we should congratulate my noble friend Lord Geddes and his committee on producing this most interesting report. It is most encouraging also that the European Commission under the direction of its transport Commissioner Mr. Neil Kinnock seems to have realised that rail has a part to play in the transport needs of the Community. Indeed, one may even suspect that a degree of urgency has crept into its deliberations over the need to take some action to alleviate problems associated with the burgeoning road vehicle population and its effect on the well-being of Community transport.

Many of us, indeed the vast majority, value the independence that motoring gives us. We seem to be quite prepared to put up with the inconvenience caused by the presence of so-called juggernauts. A trip around the M.25 is a good demonstration. One would do well to remember that this independence transcends equally to the commercial world. Many, if not all, those trucks are owned by firms engaged in providing a service to their customers by transporting goods, largely using their own staff, on roads provided and maintained using public money at little cost to themselves.

The railway also acts as a transport contractor. However, it has to provide its own infrastructure and this imposes on it a considerable financial burden. Since most EU railway administrations are government owned, governments find themselves not only having to provide very expensive roads but railways as well. Noble Lords can well imagine that there are problems with treasuries.

The real role of governments, aided by the European Commission, is to provide a framework to enable goods and passengers to move about the area as efficiently as possible having regard to environmental consequences. Some form of integration is obviously necessary. That is why I believe we should look at least positively at the new Government's proposed efforts in that direction.

The report's conclusions and the European Commission White Paper point in the direction of a considerable increase in the use of rail in the long term. That, given the environmental advantages of rail, is most encouraging. The problem seems to be in achieving the policy. I suggest that the privatisation models, as proposed and introduced in this country and in Sweden, could go a long way towards success, although it is too early to say which method is best.

There has been much new investment recently in infrastructure, including the Channel Tunnel, the Storaebelt, the soon to be completed Oresund crossings between Denmark and Sweden, French and German high speed lines, and eventually our own Channel Tunnel rail link. Much of that improvement is directed at passenger traffic but one can draw attention to the two great water crossings as being of particular benefit to freight flows.

The recommendation to establish freight freeways is a most welcome step. It will be interesting to see how the various railway administrations measure up to the task. It is encouraging to note that in this country Railtrack is actively pursuing the establishment of just such a freight route linking Scotland with the Channel Tunnel. That should do much to encourage the transfer of long distance freight to rail to the benefit of users of the motorway system. The response of the SNCF to that initiative is disappointing to say the least. I suppose it is hardly surprising given the present political situation in France. but let us hope that French railway affairs progress in the future as well as they have in the past.

Governments seem prepared to look after their agriculture lobby to an extraordinary extent. We have the common agricultural policy. I like to think that one of the main reasons is to have the land and countryside adequately farmed and managed. Can noble Lords imagine what it would be like if large areas were left unfarmed? Can noble Lords also imagine what it would be like on the motorway network if the railway systems were to become unavailable? Their continued availability and development is, I suggest. almost a social necessity given the fact that everyone wants to be able to have total mobility in their cars.

I give a rather bizarre example. Many noble Lords are familiar with the Austrian Alps and the fact that the agriculture of that region is heavily livestock based. Indeed, it is the activities of the Alpine farmers which allow many of us to indulge in winter sports. Many of the farmers use straw which has to be delivered from other parts of Austria. Much is still delivered by rail in vans for collection from the local station by farmers in their tractors. As noble Lords can imagine, one cannot get much straw into a railway van even if it is the rather more generously proportioned European model. Coupled with the fact that some of the traffic has to be delivered along narrow gauge tracks, the operation must be extremely expensive. The benefit of not having that agriculture traffic on the somewhat restricted Alpine road network is obviously worth the considerable subsidy involved.

To revert to the freight freeway issue, so ably spoken about by the noble Lord, Lord Berkeley, from the Benches opposite, much freight traffic is at this moment sent along routes that avoid areas congested by passenger traffic. Unfortunately, there has always been a conflict of interest here regarding higher weights and lower speeds. It is interesting that in Poland there exists just such a dedicated freight route. However, a little closer to home, the use by the Germans of separate lines on each side of the Rhine for freight and passenger traffic is a good example. In effect, they have a four track railway which is a somewhat unusual luxury in Europe. Together with all the river traffic, it makes an interesting spectacle.

A recent visit to north Italy showed that the Italians, who are well into intermodal traffic, are sending an appreciable number of trains along an exceedingly secondary-looking railway on the eastern side of Lake Maggiore. By doing so, trains from the Milan area passing north through Switzerland are able to avoid the congestion at Chiasso, the traditional border crossing point.

From a socio-economic aspect, the prospective loss of railway jobs as administrations become more business oriented and adopt improved technology could easily be offset by the increased use of rail throughout the Community. Outside the Community, it is interesting to note that many old cross-border routes that were closed due to the presence of the Iron Curtain or other international impediments are being reinstated. Let us remember that building motorways is much more expensive than reinstating old railway lines. In eastern Europe, where governments are perhaps less able to afford such luxuries, the availability of new rail routes is becoming increasingly interesting.

There is no doubt that rail has an important part to play in the transport area. Let us hope that this report is helpful in encouraging the various EU railway administrations better to co-operate with each other. It seems to be a bureaucratic and technological nightmare at times, as the problems with our own European nightstock sleeping cars will testify. Perhaps it will not be too long before the next report by this excellent committee will be able to tell us that many of the recommendations in the report have been achieved.

4.50 p.m.

Lord Elis-Thomas

My Lords, as a member of sister Sub-Committee C, perhaps I may congratulate the noble Lord, Lord Geddes, on the report. With our brief as regards environmental issues, we were closely interested in reading the conclusions. I remember the excitement with which I read the final draft of the report in our Select Committee meeting. Events since then, so ably set out by the right reverend Prelate, have only confirmed the importance of the report and our debate today.

Perhaps I may congratulate the right reverend Prelate on his expertise on railway matters. As a regular rail passenger through his diocese on the South Wales and West service, this helps to explain the quality of the service as it speeds through Hereford. Long may it continue.

It also falls to me to correct something which I said during our debate on the Queen's Speech, where I was a little critical about the lack of debate on environmental policy during the last general election. I may have anticipated that perhaps there would not be any environmental initiatives emerging from the Government. However, I was wrong, or at least I have been wrong so far. Therefore, tonight I want to encourage the Government, and Mr. Prescott in particular, with the noble Baroness, Lady Hayman, this evening to continue to pursue their agenda for an integrated transport policy. I want to thank them for pursuing this not only in the United Kingdom, its countries and regions, but also at the European level. The reason is that, as we come to the end of the Netherlands presidency and on to the United Kingdom presidency, there will be a marvellous opportunity for co-operation between Neil Kinnock, as the transport Commissioner, and his former colleagues in the new government in the United Kingdom to pursue this earnestly. I am sure that the Minister will tell us this evening that this is what they intend to do.

The report was valuable not only because of its analysis and conclusion but also, as always with these documents, because of the quality of the evidence. I was also very impressed by the EWS evidence and the commitment this international company has already shown to the development of a new freight market. The promise to try to increase the freight market threefold over the next 10 years, with a commercial dynamic to do that, could have substantial environmental effects. I fail to understand the argument put forward in some of our discussions on the impact of rail change that because road use is increasing exponentially the amount of environmental benefit from transfer is only minimal and therefore should not be seen as a major contribution to environmental policy.

In the longer term, clearly the transfer from road to rail of the existing additional freight will of course benefit the environment, and the sooner that is realised and the sooner it is properly priced the more effective such transfers will be. Clearly, in the area of passenger transport there are more immediate benefits in terms of the reduction of overcrowding of roads by individuals in motor cars, and particularly in travel-to-work patterns. That again is something which the report highlights, and we need to pursue it further.

The development of the United Kingdom separation between operational and infrastructural aspects of rail policy is one which many of us were concerned about before privatisation but if Mr. Neil Kinnock can be converted about privatisation so can the rest of us. However, it is not so much a sudden conversion, in my case or on the part of Mr. Kinnock, to privatisation as a conversion to transparency of funding and to ensuring that the operational infrastructural aspects are clearly identified. The operation of rail represented perhaps the worst aspects of traditional forms of state ownership and traditional forms of nationalisation. That was exemplified in the funding mechanisms, in the impact on the overall indebtedness of states throughout Europe that the rail network brought about and also in the lack of investment in terms of rail renewal, because again that had public expenditure implications.

The opening up of the rail network to a separation of the infrastructure and the operational aspects has enabled all these issues to be more clearly identified and hopefully tackled. Clearly, the existing subsidy arrangements for suburban and regional services need to be argued for and they can be argued for more clearly now on the basis of transparency. It is not the case that state aid can be poured in at the end of a year or of a five-year period in order to subsidise losses on specific services. All these are clearly identifiable and have to be identified. Therefore, the opportunity of providing state aid for so-called loss-making services—that is loss making in terms of revenue but often environmentally beneficial—can be pursued more clearly.

The United Kingdom has taken the lead in this area of separation between infrastructure and operation, with the other model which we have in Sweden operating differently in terms of the way in which funding is transferred as between the infrastructure provider and the operator. There is a different mode of transfer of resources there but whichever mode we adopt, the fact that there is this model surely will enable us to argue more clearly for identifiable environmental objectives and targets to be introduced into the provision of services.

Again in this area it is important to identify the way in which environmental benefits can be properly quantified. I would ask the Government, when they look at their integrated policy for transport, not just to look at it in terms of public transport facilities but to look at the real environmental, social and therefore economic pricing of different modes of transport. There needs to be an analysis of transport across all modes and all types of transport ownership. Only then can we clearly identify the environmental benefits that in my view certainly arise out of railway transport.

The transport network, as traditionally developed throughout Europe, is, as we have heard, related to the creation of the nation-state system. Indeed, one can look at the issue of the integration of rail transport in much the same way as we may look at the currency integration, single market integration or indeed the integration of environmental standards more generally. The rail network itself, being a nation-state creation, exhibits all the benefits of the traditional centralisation of the nation state. We need only look at the rail networks to see how they are traditionally centred on capitals. One of the interesting developments in recent years has been the growth of trans-European networks and also an emphasis on regional links, which are no longer operating in the "hub and spokes" traditional nation-state structure.

Therefore, I would make a final plea that, as we go towards 1999 and the revision of the TM guidelines, we should look at essential trans-regional connections such as the one across North Wales to Ireland. It seems to me that the exponential growth in the Irish economy at 5 per cent. or 6 per cent. a year which is predicted over the next five years should result in a much more substantial—I see the noble Lord, Lord Berkeley, agrees with me—demand for freight development along the North Wales rail link. After all, we have already an overdeveloped expressway network across most of North Wales which is pushed to capacity occasionally. To have an effective rail alternative there for freight as well as for passenger traffic would, in my view, be an essential part of regional policy, not just for North Wales but obviously in terms of a link to Ireland.

The other issue which is covered very clearly in the Sub-Committee's report and also in the original document is that of the reduction in employment in the rail industry. I would not want to sit down without mentioning that. There has been a loss of over half a million employees in the rail industry in the past 10 years. Therefore, I hope we shall see a proposal that the social fund should be utilised to cushion the reduction. I hope that will be pursued, because clearly any effective development of the network depends on the quality of the staffing. That after all is a great tradition in the history of Wales, as in all other regions of the United Kingdom and the rest of Europe. There is a great tradition of service in the rail industry and I am pleased to say, as I experienced again this morning travelling to Bangor, that that tradition of service is still maintained.

5 p.m.

Lord Elibank

My Lords, I should first like to join with other speakers in congratulating the sub-committee on an interesting report on an important subject. I also congratulate my noble friend Lord Geddes on a clear exposition of the report which clarified the main points and was an extremely helpful introduction to the debate.

When we consider rail, it is important to see it in the context of transport issues in general. This country and most of Europe face a considerable problem in dealing with the congestion, expense and environmental pollution of road transport. It is a challenge to any government to try to ameliorate that problem. It is perhaps the gravest environmental problem that we face as a nation and as a continent.

Seen against that situation, rail's possible contribution is modest. Rail is often held up by the enthusiasts as something close to our salvation in the environmental world. It is said that if we invested more, spent more time on it and gave it greater priority, the congestion and the pollution which we experience on our roads could be greatly lessened.

I am more of a pessimist. Rail, like a number of other programmes and policies, can ameliorate the situation; it can make a helpful change. But it is at the margin and should be treated as such. There are some areas in which rail is tremendously important and takes the bulk of the traffic—for instance, commuter traffic into London and our other conurbations. But throughout the country as a whole it is much less important. I have heard it said that if we made a tremendous investment in rail, both freight and passenger, it would do nothing more than absorb one year's incremental growth in road transport. Even if that is not an accurate statistic, it gives us an idea of the scale of the problem.

I should like to say a few words about freight transport. I must speak with caution because I too am a total amateur. Freight transport depends on two things: first, efficient inter-modal terminals and, secondly, a regular supply and programme of freight trains moving at a reasonable speed between the terminals. Most road hauliers would rather have their lorries spend hours in gridlock on the M.25 or other motorways than put their goods on a freight train and perhaps lose days in a siding. The pain and grief of road transport does not exceed at the moment the delays that can be caused by freight moving, as we heard today, at an average speed of 10 miles an hour. Until that can be improved, I see no realistic hope that a great mass of freight can be moved from the roads to rail.

I remember at an earlier inquiry grave reservations being aired by witnesses over the interest and enthusiasm of what was then British Rail for investing in terminals. It was felt that British Rail was not competitively interested in moving freight onto the railways. We have heard much more encouraging reports of EWS: I can only hope that it and the other franchisees can produce a much greater transfer of loads from road to rail. I wait with modest pessimism to see what can be done.

It is most interesting to have seen the network of "rail trams" that have sprung up in some of our major conurbations recently. I am not sure whether the topic falls strictly within the scope of the debate, but to me it is the most interesting development in passenger rail transport in recent years. I have experience only of Manchester, which has a good network of rail trams. They are efficient, clean, regular and reasonably priced. They have been so successful that there are ambitious plans to extend the system and to have a branch out to the airport. That seems to me to be a guaranteed way of taking motor cars off the roads. If we can produce rail trams at a reasonable price and make them reasonably efficient, investment in that sort of railway network would produce more immediate and perhaps more lasting results than the long distance, more conventional type of passenger train.

The committee dealt with gauges, which I take to mean not the distance between the two rails but the superstructure of wagons and carriages. It came to the conclusion that investment in standardising our railways with the continental gauges was not a sensible investment of money and that better use could be made of funds by improving the bureaucracy, the administration and the passenger trains between countries. I do not entirely rule out a modification of the gauge system in the UK for one network—the West Coast main line to Glasgow. When one considers gauge changes, one is generally confronted with a tremendous global figure which is horrifying in its size. But if one breaks down that global figure into annual increments over 10 or 15 years, it may become much more manageable, particularly as each section is completed to the standardised continental gauge. The towns and cities within that section could benefit immediately from the modifications.

We must never lose sight of the fact that we are on the periphery of Europe. We do not have the advantage of countries such as France and Germany which are more or less in the centre. We must always be prepared to spend more than those countries on communications of all sorts if we are to maintain our position as a major trading partner with our competitors.

5.7 p.m.

Lord Mountevans

My Lords, this report, and, indeed, this afternoon's debate, have given me more inspiration than almost any other previous European Community or railway debate. First, the Commission's proposals recognise Britain's contribution. It was Sir Peter Parker who invented the expression "public service obligation" way back in the mid-1970s. The Commission's proposals were also radical in stressing that if we do not move, and move quickly, the on-going decline in the railways will become terminal. Furthermore, it recognises that there are mountains to climb.

First, we have the debt mountain, as several noble Lords mentioned. Secondly, there is the cultural mountain, especially the one between what one might call the cost-led railway—which, sadly, still applies to much of Europe—and what I hope will become a market-led railway in this country. Those mountains have a special implication for job creation and job preservation. Thirdly, there is the mountain posed by the conflict of flexibility of road versus rail and the problems of levelling the playing field, which is distorted by environmental and social costs, in particular the great difficulty in quantifying those latter inputs.

The membership of Sub-Committee B, whose report we are debating, was uniquely qualified to tackle the issues. I cannot recall another membership which included experts such as the former Secretary of State for Transport, doubling as a former chairman of British Rail, and a former Minister of State in the same department. Both have an important role to play in emphasising that major acts of political will are necessary if we are to achieve the Commission's aims. On the technical side we have the noble Lord, Lord Berkeley—a senior member of the Eurotunnel staff, who, not I feel because of a mid-life crisis, has metamorphosed into an expert in multi-modal freight. We also had a leading civil engineer and a highly successful trade union administrator. If I single them out it is only to show how well balanced they were by other members who, while lacking the specialist skills, were less likely to take evidence at its face value and thus were more prone to ask penetrating questions. Our Committee of Selection served the House well in this context.

The choice of witnesses left almost nothing to be desired in putting the issues before the committee. If I could be allowed a dream ticket, while recognising Mr. Nigel Jones's competence in articulating the EWS view, I would note how he emphasised the learning curve which he was climbing. I would have loved, as would the right reverend Prelate the Bishop of Hereford, to hear or read evidence from Ed Burkhardt, his ultimate boss, on the US experience, where freight is king and passenger railway is much closer to death than it is anywhere in Europe.

It was also a pity that Sweden's experience was available only in the form of written evidence, because sometimes such material tells only half the story. The domestic passenger graph on page 101 confirms the argument of my noble friend Lord Elibank that one cannot treat transport modes in isolation. The written evidence does not explain Sweden's airport policy, which for several decades has been to move away from down-town airports to remote greenfield sites. There is also the introduction of the Swedish high speed train in the early 1990s, with the consequent 50 per cent. plus increase in line speed and average speed. Both those factors played a significant part in the passenger growth figures demonstrated in the graph.

Similarly, there is the fact that Swedish rail runs a "groupage" service for less than wagonload or less than container load consignments, as well as a collection and delivery service. That is not highlighted in the freight elements of the Swedish evidence. I believe such provision attracts a great deal of traffic and, although it is modest or small traffic, it is that traffic which underpins any growth in traffic in general.

The Swedes have also simplified their administration and improved reliability. These are but foothills in the mountain range which I have touched on loosely, but they must be climbed if suitable freight is to be attracted hack to rail.

Section 101 of the Committee's conclusions notes that rail's ability to reduce the volume of road traffic is limited. But I believe there is scope to some extent by following Ed Burkhardt's dicta. First, you have to cut costs, go for automation and cut staff, sad though that may be. He notes, in a magazine article which I read recently, that Wisconsin Central's major marshalling yard at Greenbay handles roughly the same volume of traffic as the EWS one at Willesden, but it manages to do so with one-eighth of the staff. Trains are now being shunted with one man and a radio.

Secondly, you have to keep up service levels and go for wagonload. The right reverend Prelate mentioned that Wisconsin Central's traffic is 80 per cent. wagonload. I was intending to say that that is a figure which is anathema to most European operators, but as the right reverend Prelate used that word first I decided not to cross swords with him but to use the word "nightmare". But all the European operators need subsidies, whereas Wisconsin Central's wagonload-dominated operation raised its income by 139 per cent. in 1993–94—that is its net income, not its gross revenue—and by a further 16 per cent. in 1994–95, a sum getting on towards £30 million.

Another sentiment of Mr. Burkhardt is that if your customer is giving you wagonload business, see if you can persuade him to give you the extra wagon or even more of the same commodity, or, by tailoring your product, see if you can move another product which your customer is already moving.

The committee, at Section 104, queries the need for a uniform cut-off date for historic debt. But if we are to see serious growth in international freight, market-led operators must replace cost-led operators; otherwise we shall have the Avesta to Sheffield situation which is mentioned in the report, where market-led Scandinavian railways, in particular the Swedish one, came face to face with German cost-led tariffs. Swedish steel is still fabricated in Sheffield and then returned to Sweden for consumption, but because of the German attitude to tariffs, which I am certain was cost-led, and was also non-negotiable, as was said earlier, material, alas, no longer goes by rail.

If the will is there you can do it the opposite way. Swedish and Norwegian rail some years ago set up an Oslo-to-Narvik service over a distance of 1,240 miles, which is roughly the same distance as Oslo to central Italy. a service which takes 27 hours and averages just under 46 miles per hour from origin to destination. This has required reducing frontier times and using trans-border locomotive working, which has been the practice between Sweden and Norway for almost as long as I can remember. It has involved trans-border crew working—alas, achieved only in the last few years, but now a fixture and fitting of their joint railway operation. It involves reduced bureaucracy and has simplified paperwork. These are all best practices which other European railways should study if international rail freight is to grow.

Those are all elements of the rail freight freeway (recommendation 106), which I would strongly welcome. I believe that these detailed elements, small in scale but big in outcome, are far more desirable than total system harmonisation. If we are talking of £1 billion to make the west coast main line (some 500 miles) fit for the 21st century, I shudder to think what a European network would cost either in finance or in terms of bickering between administrations.

Smaller sums are being spent on equipping the high speed link to the Channel Tunnel with freight loops—his was at the insistence of another place—and a freight link into Ripple Lane, north of the Thames. Here too we have hit the buffers, because if Eurotunnel, as my noble Lord, Lord Berkeley, pointed out, prices rail freight out of the tunnel, the investment is wasted. We hit the buffers again if the new French Government follow the old in opposing the Brussels proposals we are discussing this evening. How long could that go on, I ask myself. How does harmonisation square with different gauges—another subject touched upon—as in Ireland, the Iberian peninsula, Finland and perhaps eventually the former USSR? How long would it take to negotiate two round-trip tickets by Eurostar—and here I delve into the passenger business, only to discover that I have to go elsewhere to buy tickets for the onward journey into Holland?

I have talked about mountains. Let us set out to climb them but let us first tackle molehills closer to home.

5.8 p.m.

Baroness Thomas of Walliswood

My Lords, during today's debate a number of people have claimed they are amateurs as far as rail transport is concerned. I really am an amateur, notwithstanding the fact that my first employment was in the purchasing authority of Sudan railways, right opposite St. James's Palace. It took up about seven eighths or nine tenths of the space given to the embassy as a whole. Its main purpose was to buy rolling stock and other equipment for the Sudan railway. That, as your Lordships will understand, was many years ago. Sudan railways are still going, but only just. So, I am an amateur.

I should like to join other noble Lords in congratulating the noble Lord, Lord Geddes, and his committee on the work that they have done on this Community White Paper, and the conclusions which they have presented for our consideration. The noble Lord, Lord Geddes, has given a very comprehensive introduction to the White Paper and to the work of his committee. He asked the Minister a number of questions. I would like to add my support to those questions and I await their answers with great interest. I must apologise as I have a question or two of my own to ask. I am sorry I have not given advance notice of them, but no doubt if they cannot be answered today then perhaps a letter could be sent instead. I congratulate the right reverend Prelate the Bishop of Hereford on asking some pertinent questions. He is another person who claims not to know anything about the subject but he knows a great deal.

No doubt the matters we are discussing today will play a part in the debate before and after the transport White Paper which is to be published by the Government next year. I very much welcome that announcement and withdraw perhaps a little of the scepticism I expressed during the debate on the Queen's Speech. Among other things I hope that the White Paper will result in targets for the modal shift from road to rail for inter-urban and commuter passenger journeys and for freight journeys. We shall not get these policy changes unless we set ourselves some objectives. The Community, in urging us to do various things, is another helpful influence, but, as individual states, we still have to set ourselves the policy targets in order to play our part within a wider Community endeavour. Like the noble Lord, Lord Elis-Thomas, I believe that the context in which a sustainable and integrated approach to meeting peoples' travel needs is gradually emerging. I have hopes that the Government will achieve more than the previous government's transport debate managed to do. I wish them well in the production of the White Paper.

I wish to make a few general comments about the conclusions of the European Communities Committee report. We welcome the continued emphasis by the Commission and other European Union authorities on achieving a shift from road to rail and the committee's broad support for that. I am neutral on the value of privatization. It is too early to say whether privatisation has really worked. However, I am definitely sceptical about the need to separate operations from infrastructure. That argument is still not decided. There are real problems when that separation is made.

I generally support the scepticism expressed by those giving evidence and by the committee with regard to large bureaucratic organisations on a European-wide basis trying to organise the railways. The committee has committed itself to a European-level regulatory body. As I understood from the introductory comments of the noble Lord, Lord Geddes—I did not quite understand from the report—that is because the committee thinks that such a regulatory body would be an essential part of assisting inter-operability. I remain to be totally convinced bearing in mind the evidence given by the industry. Noble Lords may say that the industry would say that it did not want to be regulated and did not want large bureaucratic organisations. I was struck by the industry's interest in trying to get on with this in a practical day-to-day way rather than having to do it as part of a huge scheme. On the whole, when we are dealing with difficult situations, that is probably a sensible way of progressing.

It is impossible to cover all the topics raised in the original strategy paper and in the European Communities Committee report on it and so, like others, I shall concentrate largely on freight issues and on the proposed rail freight freeways, of whose difficulties and potential advantages the noble Lord, Lord Berkeley, spoke in great detail and with great authority. In this context I wish to ask the Government a few questions.

Generally, we support the contention that it is desirable to shift traffic from road to rail. I believe it is possible. Within that I share the enthusiasm of the Commission for trying to shift greater amounts of freight onto rail. That enthusiasm and determination is justified on safety grounds, which various noble Lords have mentioned; on the grounds which no one has directly mentioned of the greater damage caused to the roads by freight vehicles, which will become worse as vehicles become heavier and heavier; and on the grounds of damage to the local environment and pollution, particularly that caused by inner city congestion. Those are all good reasons for trying to achieve that objective.

I do not share the view of the previous government that the proportion of rail freight has fallen so low that the effect of increasing the total, even by quite a large amount, would not be significant in terms of traffic. That view was expressed today by the noble Lord, Lord Elibank. The industry in this country does not seem to share that doubt and diffidence in the matter of the shift and the potential for the shift. I was interested that the right reverend Prelate the Bishop of Hereford also questioned these doubts as to whether we can transfer from road to rail. The noble Lord, Lord Mountevans, drew our attention to other means of attracting freight back to rail and referred to the experience of other countries. It is not merely a desirable objective but an attainable objective, particularly when EWS and other companies in the UK rail industry are as bullish as they are.

We may have to do other things on the government/local government side to redress the balance between road and rail freight. I was interested by the suggestion to ban larger lorries from entering city centres. In that way road transport would have the same need to make transfers as rail transport now has. Rail transport normally has to transfer onto road transport for the last leg of a journey. One of the advantages currently seen in road transport is that goods do not have to be moved from one truck to another. As lorries become bigger, as they will do, the disturbance they cause in town centres will become worse and worse. I hope that in the course of the preparation of the White Paper the Government will pay attention to that aspect.

Another difficulty in achieving the objective of transfer which cannot necessarily be achieved simply by opening up European railways to competitive operations is the inbuilt price/convenience advantage that road transport has over rail for both passengers and freight. My noble friend has outlined his fears in that respect. As those giving evidence from the industry pointed out, railways, whether they like it or not and irrespective of whether they are competitive within the industry, are subject to competition from road transport. While there may be some discussion as to whether road users bear the full burden of the costs which they impose—my view is that they do not—users are faced with higher journey costs at the point of use on rail as compared with road. That is one of the main deterrents to freight shippers and private individuals approaching their transport needs. What action are the Government contemplating to try to shift that balance a little in favour of rail as compared with road? I believe that this perceived cost has to be tackled at a national level and needs real government input. Perhaps not today, but during the preparation of the White Paper, I shall be interested to see what the Government have in mind.

I believe that it was the right reverend Prelate who discussed the acquisition by EWS of Rail Freight Distribution. My understanding is that that is still being held up by Commission attention being paid to the competition aspect and whether too much subsidy is involved. If I am correct, I very much hope that the Government will be able to make the appropriate intervention at Community level to ensure that this merger can go ahead because, as the right reverend Prelate said, it is very much in the interests of getting more freight onto rail that the determination and management skills of EWS should be applied also to the Rail Freight Distribution company.

There is another problem in which the Government might take an interest, and I hope that they will; namely, the subject of access to an international rail freeway from the United Kingdom. The noble Lord, Lord Berkeley, dealt with that. My impression is that the Germans, Dutch and Italians are beginning to talk very constructively about the construction of such a freeway, but we are hampered because we have to go through France in order to get to any of those countries and the French alliance of the rail company, the government and the unions is opposing the initiative. Are the Government able to make representations, either through Community organisations or directly to the French Government, to see that that is no longer a disadvantage to us?

The noble Lord, Lord Berkeley, drew attention to the high cost of taking rail freight through the tunnel. Again, I understand that one of the problems is that competition between Eurotunnel and the ferry services has resulted in the heavy discounting of the price for lorries going both through the tunnel and on the ferries. It has been suggested that the prices now being charged are below cost. Are Ministers concerned that Eurotunnel has not passed on that price benefit to rail freight operators, that is to say, for loads going by rail? If so, is there any action that they can contemplate taking?

Finally, I draw attention to the fact that while there seems to be some confidence that there is capacity on some of the continental railways to accommodate the freight freeway and that on those railways it is bureaucratic rigidity which is the main obstacle to progress, on this side of the Channel the situation may be different. The noble Lord, Lord Elibank, considered the possible need to modify our infrastructure to adapt to wagons of a different gauge.

There has been a great deal of talk over recent months and years on a subject which the noble Lord, Lord Berkeley, holds close to his heart; namely the piggy-back. I do not know whether the Government will be interested in supporting that initiative, particularly on the West Coast mainline where it appears that the recently signed contract with Virgin may mean that we do not have the right capacity to accommodate the desired through route from the Channel Tunnel to the North and North-West.

My last point deals with the different regions. Are the Government interested in the East-West Rail Consortium proposal for a route from the haven ports in East Anglia into central England and from there to the North and North-East? Obviously, it would be of great benefit if we could have another route for rail travel, as we used to have, from those ports directly into northern Europe. For that to succeed we need the right capacity to take rail traffic to and from those ports.

I welcome the report and the Commission's interest. I look forward with great interest to watching a government which, I hope, are committed to the same objectives, carrying out their policies.

5.35 p.m.

Viscount Goschen

My Lords, we have certainly had a fascinating debate this afternoon, as ever, on railway matters. I congratulate the Committee on the production of its report. It is a very thoroughly researched document. An enormous amount of high quality evidence was taken and a great deal of analysis went into it. As the noble Baroness, Lady Thomas, remarked, we have heard a number of speeches from people who claimed not to know very much about railways, but who then went on to give highly informed speeches on the subject. I only hope that the reverse is not thought of the noble Baroness opposite and myself as we ought to be expected to know something of the subject. But, of course, that will not be the case.

We heard a very good speech from the right reverend Prelate the Bishop of Hereford, who was one of the notable claimants of innocence in the matter of railways. But the House may not know that he knows a great deal about motorcycles as well, so the depth of his knowledge about transport has few bounds.

It has been said this afternoon that there is no doubt that the railways are of key economic, social and environmental importance to this nation's transport requirements and also to our European partners. It is very clear that changes are required in Europe if the decline in investment and in rail's share of the passenger and freight markets is to be reversed. Here I find myself totally in agreement with the Transport Commissioner.

Of course, we know that the Conservative Government recognised the strength of this issue and these arguments, which led to the structural reform introduced by the Railways Act. We know that this measure met very bitter political opposition right up to the general election campaign. I certainly welcome the conversions that we saw on this issue and the U-turns on the commitment of the Labour Party to a publicly-owned railway, particularly after my colleagues and I had tried to persuade them over the course of more than 200 parliamentary Questions in this House alone and of lengthy debates. At that stage we did not seem to have convinced the party opposite. I am very glad that at the 11th hour we managed to do so. I very much look forward to a detailed statement from the noble Baroness opposite putting some flesh on the bones of the public statements that we saw during the election campaign. We saw the then Leader of the Opposition in a photocall with a privatised train operator, which raised more than one eyebrow. That certainly added weight to the conversion.

We know that the policy of privatisation was controversial and as such it certainly made a change, particularly in an area where a public sector body had so long held a cosy monopoly. That is inevitably so. The prospect of change provoked some to don rose-tinted spectacles and to reminisce about the good old days of British Rail in the 1970s. But I believe that most commentators, when looking at the issue seriously, realised that, in the past 25 years and beyond, the rail network in this country had had very real problems indeed. British Rail had become desperately inefficient and distanced from the needs of the consumer. That is one of the things about which we are now all agreed. British Rail lacked an incentive to improve. The public sector was unable to provide the level of investment required.

The reality now is that privatisation, despite very real political opposition at the time, has been a clear success. We have seen some notable conversions to the cause. I was delighted to see the noble Lord, Lord Elis-Thomas, in his place, and to hear how he had followed the arguments concerning rail privatisation and the separation of the vertically integrated units. I was extremely interested in his opinions and in those of the Transport Commissioner, Mr. Kinnock, to whom the noble Lord referred.

We have seen companies competing fiercely for franchises, new levels of service and a new quality of service—higher than was provided by British Rail—new safeguards for passengers, with guaranteed levels of service, and key fares being capped. There has also been new investment, with over £10 billion-worth of investment planned by Railtrack.

Lord Howie of Troon

My Lords, the noble Viscount is making a most interesting speech, but has he noticed that the report is not about rail privatisation in the United Kingdom?

Viscount Goschen

My Lords, the report is about Community rail strategy. If the noble Lord looks again at the report, he will find that it refers extensively to what has happened in the UK. I very much regret the fact that the noble Lord has not been able to make a detailed contribution this afternoon. Nonetheless, we look forward to hearing from him in later railway debates when he has more time available.

As I was saying, we have also seen new investment by the privatised train operators in new rolling stock. I refer, for example, to Virgin Rail's commitment to invest in high-speed tilting trains. Passenger TOCs are committed to investing considerable sums in rolling stock. All of that has been achieved with a saving to the taxpayer over the next 15 years of some £6 billion. In seven years' time, the grant requirement will be about 40 per cent. of what BR claimed for running the services last year. I should be grateful if the Minister could confirm the accuracy of those figures.

I now direct my remarks particularly to the noble Lord, Lord Howie of Troon. It is inevitable that any debate on Community rail strategy examines the clearest possible example of where such major structural changes have taken place—and that is in the UK. I think that it is of considerable significance—indeed, almost every speaker this afternoon has referred to it—that we examine what has happened in this country (albeit over a very short period of time) from the extremely pessimistic predictions that were made at the time of the passage of the Railways Act to the realities of today.

It is against that background that we now see a widespread acceptance internationally that there have to be major structural changes in rail networks. In Japan, Germany, Sweden and the Netherlands there have been steady moves in this direction. We now have before us the Commission's White Paper, which is a further endorsement of this approach. There is a great deal in the White Paper with which we could agree. The central message is that railways have largely been insulated from market forces, and that they will not deliver anywhere near their full potential unless drastic action is taken to revitalise them. There is a greater emphasis on commercial operations, and on redefining the relationship between government and operator. That is precisely what has occurred in the United Kingdom and it is of direct relevance to what is happening in Europe.

When we were in government, we welcomed the White Paper. Indeed, in the explanatory memorandum which was submitted by Mr. John Watts, who was then the Minister responsible for railways, he said that the White Paper successfully identified many of the issues that rail must address if it is to develop and, indeed, increase its market share. Certainly, the recognition that rail must, be more efficient, customer orientated and attractive to users, whilst at the same time reducing the burden on the state for subsidy", was music to our ears, as it reflects our own determination, which led to the privatisation of the UK's railways. We support the emphasis on greater commercialisation of rail networks and the proposed extension of separation of infrastructure from operations, measures which have, of course, already been implemented in the UK. We welcome the recognition that more freight traffic needs to be encouraged to use rail.

In his explanatory memorandum, John Watts indicated that the then government supported the Commission's objective of increased interoperability of conventional rail where this will improve competitiveness. Measures must be firmly linked to cost/benefit principles. We did not agree that successful financial restructuring required that all past debt be relieved, and we would expect normal state aids criteria to apply. There were, however, a number of areas where we did not necessarily support the Commission: for example, we believe that the level of access charges should be set by national infrastructure managers, not by a European body. I should be interested to hear the Minister's comments on the analysis that was put forward by the then government to find out where, if at all, the policies of her government differ from ours.

As was mentioned by my noble friend Lord Geddes, the White Paper is really more of a Green Paper, as it does not contain specific legislative proposals, but is couched in more general terms. Although there is detail in some areas, in others specific detail is lacking.

With regard to the committee's examination of the report, evidence was given from a wide variety of sources. I was certainly very interested to read the evidence of the independent rail regulator, Mr. John Swift QC. He was struck by how far behind the rest of the Community was in rail restructuring. He was quite right to draw attention to the necessity of introducing market forces or increasing efficiency, as the continuing burden on the state for subsidy would not be sustainable. If railways are to have a long-term sustainable future in Europe, these truths will have to be faced and tough decisions will have to he taken.

When considering how the measures proposed in the White Paper would affect the rail networks of Community countries, it is best to start by looking at the UK example. In giving evidence to the Committee, John Watts was clear that the changes made in the UK were in line with the policy objectives set out in the White Paper. That must put the UK in a very special position when it comes to negotiations in the Transport Council, because the UK has the expertise in, and experience of, such a transfer and of structural changes. Indeed, the objectives that are set out in the White Paper coincide to a great extent with the experience of the UK.

This afternoon's debate is therefore of considerable importance. It is probably the first major opportunity the new Government have had to outline in some detail their policy towards the railways and how they intend to apply that approach to their negotiating policy in Europe as regards the Commission's proposals. There are therefore some key questions for the Government to answer, and I am sure that the whole House looks forward with considerable interest to the speech of the noble Baroness, Lady Hayman. The House was probably looking forward rather less to my speech, because I have rehearsed the policy of my party on railway privatisation and railway restructuring on possibly more than one occasion. As we now have wholly new policies to come from the party opposite, we can all look forward with great excitement to hearing from the new advocates of privatisation.

As we know, the Labour Party opposed this policy tooth and nail at the highest level, vowed to stop the privatisation process and, when that looked set to fail, committed themselves to taking back the railways into public ownership. Their subsequent U-turn was most wise, and most welcome, but how far does it go, particularly in view of the general acceptance of the success of the policy, and the consistent moves towards following our example from our European partners about which we have heard this afternoon? The Commission's White Paper is the clearest possible example that this is the case. In the light of this, will the Government now be the international advocates of rail restructuring and privatisation? Will they impress their views on their European colleagues? But before we find the answers to those questions, their credibility in Europe on this matter will depend upon how they handle the issue at home. I invite the noble Baroness to tell the House whether the Government intend to accept the current structure of the privatised railway industry and, if not, what changes they propose to make to the regulatory and franchising system, to track access arrangements and to freight facility grants.

Perhaps I may ask as an aside, although I believe that it is a relevant one, whether Railtrack fulfils the eligibility criteria for the windfall tax. I do not want the noble Baroness to be coy and invite me to wait for the Budget. I should like to ask specifically whether it fulfils the eligibility criteria. That is deeply relevant. Does the noble Baroness believe that if such a tax were imposed on the infrastructure operator it would, for example, speed the improvements to the West Coast main line or hinder them?

So far as labour relations are concerned, it is clear that, where there are good incentives for staff to perform well out of the monolithic structure of state railway corporations, real progress can be made. The White Paper notes that railway workers can expect overall employment in the industry to decline but should recognise that their job security depends upon making rail more competitive and that that will require a more productive and flexible workforce. That must be true. I was very interested that, in his evidence, the Transport Commissioner, Mr. Kinnock, said that rail unions faced a harsh choice between losing virtually all the jobs in rail because change had not taken place or making changes which would probably bring about workforce reductions but in a controlled and controllable way.

If the noble Baroness allows her eyes to dwell on the section of her speech that deals with employment issues and how interventionist the Government seek to be, I shall be interested in hearing any comments that she may want to make on the threatened ASLEF industrial action that is to take place fairly shortly. The noble Baroness may not be keen to volunteer an opinion, but I shall respect her very much if she does so.

I see that I have trespassed considerably on the time of the House. However, the issues of vertical integration were ones on which a number of my noble friends and other noble Lords talked a great deal. Suffice it to say that the model that we have seen with the separation of the infrastructure from the operations has brought very considerable benefits.

As to freight, I believe that we have had a very positive discussion this afternoon. In particular, I refer to the speeches of the right reverend Prelate and the noble Lord, Lord Elis-Thomas. They have been impressed by the determination of the new private sector operators to increase market share and receive the full benefit of that improved market share, using all the incentives and new investment possible to ensure success. Possibly the most important change has been the orientation towards the customer. I believe that that remark by the right reverend Prelate is very valid.

If this debate had taken place five years ago I am sure that the White Paper would have contained very different conclusions and that the Committee's remarks in its consideration of that White Paper would have been very different. The fact that in the intervening period we have witnessed the biggest structural readjustment in the railways for a very long time—from proposals for legislation through to enactment and into successful operation—has completely changed the game plan. I am very pleased that there is now wide acceptance that this policy has worked. I look forward to hearing the proposals of the new Government.

5.54 p.m.

The Parliamentary Under-Secretary of State, Department for the Environment and Transport (Baroness Hayman)

My Lords, I start by thanking all noble Lords who have been so generous in their welcome to me in this debate tonight. The right reverend Prelate the Bishop of Hereford referred to the time we first met when I made a speech to a group of senior boys at Eton. He said that after that nothing could get worse. Sometimes I look at the Front Bench opposite and believe that nothing has changed at all!

A debate in your Lordships' House is a sure way of focusing a new Minister's mind on a subject with which he or she may not have been previously familiar. It is a daunting as well as a salutary experience to reply to a debate in this place where, however specialised the subject, one is always dealing with specialists. Sometimes they come from unexpected places, like the Bishops' Bench today.

I am most grateful to the committee and to noble Lords who have spoken for ensuring that I have at least started to get to grips with this important area early in my time as a transport Minister. I record the Government's thanks to the committee and in particular to the noble Lord, Lord Geddes, both for his work as chairman and for the lucid and authoritative way in which he introduced the debate today.

A large number of specific questions have been raised in the course of the debate by the noble Lord, Lord Geddes, and other noble Lords. I shall attempt to reply to the vast majority of them in the course of my speech. However, I must tell the noble Viscount, Lord Goschen, that at the risk of sacrificing his respect I shall not be drawn into answering questions on putative ASLEF action. Even more so, I believe that it is prudent rather than coy in a debate on European railway strategy not to be tempted into discussing the plans of the Chancellor of the Exchequer for a windfall tax.

The White Paper on revitalising the Community's railways has come at a crucial time. Railway use across Europe, both passenger and freight, has been in decline for many years. This is a trend that must be reversed not only for the sake of the railways but also for wider environmental and transport considerations, as many noble Lords have pointed out. The committee recognised clearly the importance of the railway system in Europe in its report and that given the right support railways could become a cheaper, faster and thus more efficient transport option. The Government agree. Like the noble Lord, Lord Methuen, the right reverend Prelate the Bishop of Hereford and the noble Lord, Lord Cadman, we believe that a more efficient and attractive rail system able to compete with other transport modes will also bring significant benefits to the environment by reducing pollution and congestion.

As several noble Lords have said, next year we shall publish a White Paper on an integrated transport policy for this country. I am glad that we have been able to reassure some of the more sceptical Members of your Lordships' House in the first debate on transport issues as to the fulfilment of that commitment. The White Paper will set out a long term strategy and a sustainable framework for decision-making on transport issues which takes into account our responsibility to safeguard the environment. I am grateful for the support of the noble Lords, Lord Cadman and Lord Elis-Thomas, in this respect. We believe that this meshes very well with the European approach set out in the White Paper.

The Government therefore share and welcome the committee's support for the White Paper and agree with many of the initiatives proposed by the Commission. There is a great deal of work to be done. We shall need to consider carefully the best way of proceeding in the interests of the United Kingdom. I hope noble Lords will understand that the Government are still developing their detailed policy in a number of areas, but I should like to take the opportunity today to respond in general to the White Paper and the conclusions that the committee drew from it and to answer points that have been raised in the course of the debate.

At the outset, I believe that it is important to flag up the clear shift in approach in the new Government's attitude to Europe and the European Union. We want the United Kingdom to be a leading player in Europe—a contributor to and a shaper of policies. In this spirit we shall take a more positive attitude in a number of areas. We see Europe as an opportunity for the United Kingdom—for jobs, working conditions and trade. The United Kingdom presidency next year gives us a real chance to make an impact. We want to make progress towards completion of the single market, tackle unemployment and promote flexible labour markets. Positive action in the rail sector will contribute to all those aims.

It is clear that we are dealing today with a fundamental transport issue for Europe. Mr. Neil Kinnock, the European Union Transport Commissioner, whose evidence to the Select Committee has been referred to by several contributors to today's debate, was asked whether the main motive behind the White Paper was commercial, environmental or to do with the dreaded word "interoperability". He replied that all of these issues were significant but that at root it was a question of survival for the railways. He saw the rapid demise of the rail sector not only in terms of its railway consequences but as a serious additional threat to an already overburdened road system. That point was also made by the noble Baroness, Lady Thomas of Walliswood. He described the potential effects of further decline in terms of the economy, employment, the environment and the efficiency of transport movement within and across the single market as devastating. The Government agree with the analysis of Commissioner Kinnock and the committee that change is urgently required; moreover, the Government have the political will to bring about such change.

It may be helpful if I say a word or two about privatisation. It is tempting to follow the invitation of the noble Viscount, Lord Goschen, and reopen the debate about privatisation within this country. But it would not be appropriate to go into that matter in detail—tempted though I might be—in a debate on European transport matters. I should point out that privatisation is neither a prerequisite nor a requirement of the proposals in the White Paper. The main changes which the Commission has proposed, and with which both the committee and the Government agree, can be achieved within the framework of a well-run state rail sector.

The timing of the White Paper is significant because, as noble Lords are aware, many countries have already restructured or are in the process of restructuring their railways to give effect to EC Directive 91/440. That directive, which came into force in 1993, requires member states to separate the management of railway infrastructure from the operation of train services so that in terms of management, administration and accounting, the railways are afforded independent status—an issue referred to today. It also allows international groupings—that is, associations of companies in different member states—access to the networks of those countries where the railway operators are based, as well as transit rights in between. The White Paper rightly says that further restructuring is necessary if the process of regenerating the European rail sector is to continue. On the question of debt, for example, financial restructuring is essential if a transparent system for the allocation of, and charges for, train paths is to be realised.

Perhaps I may reply to the noble Lord, Lord Geddes, with regard to the Government's attitude towards the cut-off date for the relief of debt. The Government are not wedded to the one date of 1993. But whatever date is chosen it must provide the right basis for sound financial management.

In pursuing the extension of open access, a principle with which the committee agrees, questions such as whether international services should take priority over domestic services will need to be addressed.

The committee commented on the Commission's suggestion of the creation of a European railway agency as a possible means of resolving the problems of infrastructure allocation and the general integration of national railway systems. Its view was that if such a body were to be set up, it should be more of a regulatory authority than an agency. That is obviously an area at which the UK and its European partners will have to look more closely as proposals are developed. It will be necessary to identify those tasks which could usefully be undertaken, or those areas which need to be regulated, and then ensure that the existing mechanisms could not be improved before the case for such an agency or authority could be demonstrated. That is an issue at which we need to look in some detail. I hope that that helps noble Lords who raised the issue.

The committee also welcomed the concept of rail freight freeways. My noble friend Lord Berkeley and other noble Lords referred to that important issue in some detail. The aim is to develop international freight services with freer access and better co-operation and co-ordination between rail freight operators and infrastructure managers. I hope that will be welcomed by the noble Lord, Lord Elibank, despite his pessimism about the scope for change. This would include "one-stop-shop" facilities to deliver fast-response, coherent path allocations across borders and an approach which encouraged the players to market an end-to-end product, beyond a purely national perspective.

As your Lordships will know, a high level group of member states' representatives has been meeting under Commission chairmanship to take the rail freight freeways initiative forward. The Commission sees the freeways idea as an interim solution pending multilateral agreement to further liberalisation of freight access rights, an objective which we share in helping to complete the single market in the transport sector.

It may be helpful if I say a word or two about the latest position on freeways. The Commission has submitted within the last few days its review of the work of the high level group to the Council of Ministers. The review summarises the action to be taken by the member states and their railways and identifies a number of key issues for resolution over the longer term, notably track access charges, train path allocation and the establishment of a performance regime for freeways. The Commission concludes by suggesting a wider remit for the high level group, broadening the debate on longer term issues to encompass passenger services as well as freight. On a more practical level, there are active proposals for the early implementation of the freeway concept on a number of routes: one is a north-south freeway linking the Netherlands and Italy. Another is UK-Hungary, which is also the subject of an application for funding under the pilot actions for combined transport scheme from the European Freight and Logistics Leaders Club in which a number of UK-based rail interests are prominent.

The Government very much welcome the fact that the UK will be among the first in taking active steps towards making the freeway concept a reality and we shall be supporting the application for PACT funding. We hope that freeways can be developed quickly in other member states and the benefits of flexibility and more open access exploited to the full.

The noble Baroness, Lady Thomas of Walliswood, asked about the French Government's attitude in that respect. The French had previously opposed the White Paper, and, in particular, the proposals for extending open access. However, the restructuring of SNCF has recently been completed, and we hope that that will preface a more pragmatic approach by the French. The noble Baroness asked also about the opportunity for piggyback services on the West Coast main line. We understand that Railtrack is currently examining the opportunity for a freight upgrade. We expect to know more when those investigations have been completed.

There is much else to be commended in the White Paper. As the committee noted, many member state railways are burdened with substantial debt; that prevents competition on equal terms, as the noble Lord, Lord Mountevans, said. Investment has not always met business needs and the decline in the attractiveness of rail has led to reduced revenue. Relieving debt and allowing independent financial management will allow the railways to keep track of their costs and revenues and enable subsidy to be focused where it is needed; for example on the provision of a guaranteed level of socially necessary rail services.

In addition, the Commission has put forward proposals to separate the management of infrastructure and the provision of train services into distinct business units, with separate management and balance sheets. The committee, I know, was not convinced of the merits of that proposal but, after a slow start, many member states, including France, which until recently was strongly opposed to the idea, are now taking this route. The Government believe that it makes sense. I shall reply to the concerns of the noble Lord. Lord Geddes, by reiterating the point made by Commissioner Kinnock, that the fundamental reason for seeking the change was to help new entrants gain entry to the market and to enable a competitive, commercial relationship between the providers and users of the infrastructure.

In terms of trans-European train operation, the Government agree with the committee that it would be more cost effective to pursue the benefits of greater interoperability by developing compatibility in systems and equipment rather than by aiming for total harmonisation. The noble Lords, Lord Methuen and Lord Geddes, referred to those issues. We support the aims of the existing interoperability directive which applies to the European high speed train network. But for this directive and any future proposals for conventional rail lines, we believe that technical and administrative measures to effect interoperability should be kept to the minimum necessary to ensure the safe and efficient running of through trains on the network. At the same time the potentially high costs of interoperability should not be allowed to outweigh the benefits. The UK is playing an active role in the preparation of technical specifications for interoperability with a view to producing practical solutions within a realistic timescale.

My noble friend Lord Berkeley asked about sleeper services through the Channel Tunnel. I understand that those services are under review by Eurostar and its European partners. Under the railway regime that we presently have in this country it is for the railway companies alone to decide what services to introduce and when.

Noble Lords drew attention to the fact that restructuring Europe's railways and the resulting improvements in efficiency have led to a reduction in the railways' workforce. The noble Lord, Lord Elis-Thomas, spoke about that. Perhaps I may make clear the change in this Government's attitude as compared with the previous Administration's negative response to the committee's recommendation that the European Social Fund might be used to mitigate the impact of job losses. We believe that every avenue should be explored to make it easier for redundant employees to find new jobs and share the committee's view on the issue. However, with only limited funds likely to be available, they should be aimed at those areas where redundancies exacerbate existing regional unemployment problems. We will need to ensure that there is a sound legal base for use of funds in this way and that they are properly targeted—not simply used to bail out those members states which have made no provision for redundancies at the expense of those which have.

The White Paper contains many positive ideas for ensuring that rail becomes an attractive, viable alternative in comparison with other transport modes, most of which were endorsed by the committee. The UK, which has already implemented many of the Commission's proposals, will take an equally positive approach in assisting the Community to achieve its goal. We have experience in this field which we can share with our European colleagues. Our presidency of the EU in 1998 provides a valuable opportunity which we are determined to take.

In conclusion, I would like to reiterate the Government's gratitude to the committee for its important contribution to the wider debate on the future of Europe's railways and for recognising that major change is needed, not just at national but at European level. This Government are determined to contribute positively to this change and intend playing a full part in the concerted effort that is necessary to achieve a new era for Europe's railway system.

6.12 p.m.

Lord Geddes

My Lords, it is customary on these occasions to say what an interesting and valuable debate we have had and for the proposer of the Motion to thank all those who have spoken. But we have had an extremely interesting and constructive debate and I thank all those who have spoken.

I thank in particular the noble Baroness the Minister for a very comprehensive and constructive reply. If I heard her correctly, relative to the committee's report—and that is the only reason why I am standing and not sitting—she disagreed with its conclusions in only one respect. That was concerned with the separation between infrastructure and operation. I reiterate that the conclusion of the committee was neutral in that respect. We said that we did not regard it as a necessity. We did not express an opinion as to whether we thought it was good or bad. Our conclusion was that different countries should or would approach the matter in different ways given their national characteristics and—dare I say it?—problems. Therefore, we have reached the situation in which the Government concur with all the committee's recommendations, which is a very satisfactory situation.

It is not my job to go through every speech that has been made and it would be invidious to do so. However, perhaps I may make a couple of points. First, I greatly welcomed the contribution of the right reverend Prelate the Bishop of Hereford. I hope that he can encourage his fellow Lords Spiritual to join in such debates more often. It genuinely adds to the debates, and we are very grateful to him.

The right reverend Prelate believed that there was an underestimate of the scope for transfer from road to rail. My noble friend Lord Elibank took the opposite view and poured slight scepticism on that belief. The committee was extremely disappointed that on the evidence there did not appear to be great scope. I draw the right reverend Prelate's attention to paragraph 85 in particular, which states: While supporting rail for these reasons"— economic, environmental and all the other reasons— we recognise that the revitalisation of rail, even on the most optimistic forecast, is likely to have in itself only a minor impact on the overall balance of transport modes". We found that conclusion intensely disappointing, but on the evidence we received we could reach no other conclusion. As your Lordships know, a report can be made only on the evidence received.

The noble Baroness, Lady Thomas of Walliswood, spoke of the regulatory authority. We put forward that suggestion, if I may use lay terms, because we thought that it would be necessary to have a really strong referee or umpire who could knock heads together and perhaps ultimately say, "Look, you will do it this way and not that way because the two sides cannot agree". That was the point of our emphasis on a regulatory body. I note the Minister's remark in that context and I concur. Let us wait to see whether existing agencies and authorities can do the job. The committee, in conclusion, doubted it, but I take the point that we should wait and see.

The noble Baroness, Lady Thomas of Walliswood, gave me a good opportunity to refer to a previous report of the committee under the inestimable chairmanship of my noble friend Lord Elibank; namely, that on the weights and dimensions of road vehicles. If the noble Baroness cares to look at the report dated 26th July 1994 she will see conclusion 49, which states: We are persuaded that 44 tonnes spread over six axles causes significantly less damage than 38 tonnes over five". Therefore, we do not concur with her that more weight is necessarily more harmful.

It has been a good debate and I thank all those who have taken part. I commend the Motion to the House.

On Question, Motion agreed to.