§ 4 p.m.
§ Baroness Hayman
My Lords, with the leave of the House, I will now repeat a Statement being made in another place by my right honourable friend the Deputy Prime Minister. The Statement is as follows:
"Madam Speaker, mindful of your recent request, I shall keep this Statement short, as far as is possible for such a complicated subject of such importance to this House. To assist honourable Members, I shall make arrangements for a memorandum to be placed in the Library of the House.
"In March 1996 the development agreement to build the Channel Tunnel Rail Link was awarded to London and Continental Railways, known as LCR. LCR also took control of the Eurostar service. Its plan was to commence construction in late 1997. The agreement provided for a taxpayer contribution worth £1.8 billion. When I had the chance to examine the details of the deal put in place by the previous government, I was appalled. They took the cheapest bid based on over-optimistic forecasts of Eurostar revenue, without even commissioning their own independent forecasts, a failing we have now put right.
"The Government were seriously exposed because of the small financial commitment made by the private sector. Furthermore, as a consequence of the previous government's intention to conceal public subsidy of the Channel Tunnel, Eurostar was hampered by the requirement to pay Eurotunnel for train paths it was not using. Even this week I was asked to find £100 million to pay for specially designed sleeper trains which do not work, have never been used, and are now lying idle in a field.
"The kindest thing I can say about this whole agreement is that it was flawed from the start. In January of this year it almost collapsed. The company could not fulfil its contract. At that point I was faced with a clear choice. I could have abandoned the present contract with LCR and invited new tenders. But that would have meant two years or more of delay, with all the blight and uncertainty that would have caused. The equivalent of two-thirds of the grant would have been spent on Eurostar's debts and continuing losses with nothing to show for it. Alternatively, I could ask it to reconsider the financing of the project, and come forward with proposals to meet all its original obligations. That was the path I chose.
357 "I explained that LCR had requested an additional £1.2 billion of taxpayers' money, on top of the £1.8 billion already committed. That was unacceptable. I gave LCR one month to come up with new proposals, and subsequently extended that period ultimately to this week. At the end of March LCR made an improved proposal, but still failed to meet the Government's requirements.
"I am very aware of the importance which honourable Members on both sides of this House attach to this project which had an approved passage through the House. I have always believed that Britain should have a high speed passenger and freight link to Europe, equal to those on the other side of the Channel. This is an important project, comparable to any which this Government are promoting. It is a key part of our integrated transport policy. It is a national asset which will bring benefits not just to the south-east, but to all parts of Britain. It is clear this country wants this railway built. All parties supported the Channel Tunnel Rail Link Act, which passed its Second and Third Readings unopposed.
"This project offers immense benefits: economic, transport, and environmental; improved speed, reliability and capacity for international and domestic services—for both passengers and freight; and it will also play a major part in regenerating north Kent and the East Thames corridor including Stratford and King's Cross.
"The Government want to see this project proceed. But, as I have made clear, not at any price. My firm view was that LCR could carry on if it was able to deliver the whole project from the Tunnel to St. Pancras according to the contract. I made clear that in addition the Government required: a further reduction in the proposed additional cost to the taxpayer; a robust financing plan, based on realistic forecasts for Eurostar; a balance of incentives which would ensure the construction of the whole of the rail link; and an increased risk transfer to the private sector.
"For the past four months we have been involved in intensive negotiations, and I can now inform the House of the outcome. The call on public finances represents good value for the taxpayer. There is a robust financing plan. It is based on a proper assessment of future Eurostar revenue. The incentives to complete the whole link are in place. The private sector will take a greater share of risk. In short there will be a high speed Channel Tunnel Rail Link.
"Today I signed with LCR and Railtrack a statement of principles which meet all these requirements and fulfil the contract agreed by the previous Secretary of State, the right honourable Member for Hampshire, North West. Under this public private partnership, LCR has been strengthened. There is a new management team in place, and LCR has agreed to raise more equity to support the project. Railtrack has agreed to take a key role in building the link. It will manage the 358 construction for the railway up to north Kent, and will commit to purchase it upon completion. It will have an option to build and buy the remainder of the link.
"LCR has secured a strong partner to operate Eurostar. It considered two very strong bids, one from Virgin, the other from a consortium comprising British Airways, National Express, and the national railways of France and Belgium. It has today agreed to award that contract to the consortium. LCR has the same obligations to build the entire 68 miles of railway from the Channel Tunnel to St. Pancras in London via Ebbsfleet and Stratford, entirely in accordance with the Channel Tunnel Rail Link Act, endorsed by this House. It will be built to the same route and the same specification, to the same high standards, and with the same environmental and heritage safeguards, undertakings and assurances given during the passage of that legislation.
"Construction will begin towards the end of this year. The stretch from the Channel Tunnel to the turn-off to Waterloo in Kent is due to be completed by 2003. At this stage services from Waterloo will benefit from the new high speed line. Construction beyond this point is expected to commence in 2001 with the line through Ebbsfleet and Stratford to St. Pancras finished by 2007. This will include the proposed new Thameslink station at St. Pancras. There will be no change of route under this agreement. It will be exactly as in the Channel Tunnel Rail Link Act. The Eurostar consortium will operate the trains from Waterloo to Paris and Brussels, and in due course services from St. Pancras.
"I recognise that many honourable Members wish to see an early start to regional services. I can assure the House that LCR remains under an obligation to provide the infrastructure for regional Eurostar services. The trains for those services are currently lying idle. I have therefore asked the consortium to review urgently the feasibility of such services, and put proposals to me before the end of the year. I shall inform the House of the outcome of that review in due course.
"In addition, the consortium has a vision of Heathrow as a gateway to Europe for services from across the country. The consortium proposes to establish from as early as 2001 a service from Heathrow Airport to Paris. Heathrow is the world's busiest international airport. It is already Britain's biggest bus station, connected to the largest underground network in the world. This new service should in time establish Heathrow as an integrated transport interchange of international importance, connecting long haul air services directly into the European high speed rail network.
"I have always made clear that the Government required a significant degree of risk transfer to the private sector and this deal achieves that. If construction costs overrun, Railtrack will carry the full cost. If Eurostar revenues are less than forecast, Railtrack and the consortium will share the burden along with the Government. I have made clear that there must be a strong incentive to complete the 359 whole link from the Tunnel to St. Pancras and this deal achieves that. The Act requires the whole link to be built. The contract obliges LCR to build the entire link.
"I have always made clear that the Government required a fair deal for the taxpayer, consistent with the Government's existing obligations under the contract and this deal most certainly achieves that. The basic grant will remain at £1.8 billion and there will be no requirement for additional Government support before the year 2010. Moreover, following intensive negotiations, the extent of the Government's additional contribution, will not be the £1.2 billion requested in January, not even the £700 million which may have been read in the press this week, but £140 million and with the probability that after the year 2020, our share in the benefits will more than compensate for this extra grant.
"All the parties have contributed to this improvement—LCR, Railtrack, the consortium and the Government. Recognising the unique features of this project, and our commitment to strengthen international rail transport links, we have agreed that the Government's credit will stand behind £3.7 billion of bonds issued by LCR privately in the City to fund the project. The debt will be repaid out of the proceeds of the sale of the completed link. The risk of the Government incurring liability under the guarantees is therefore remote. The Government will support the financing package which will allow this project to proceed now, and at the minimum financing cost. The alternative would have been considerable delay and increased costs.
"But this Government do not intend to offer taxpayers' support without something in return. This Government believe that in a real public-private partnership, not only the costs are shared, but also the benefits. The Government are sharing the risk, so it is only right that the taxpayer should share in the benefits. I have therefore agreed with the parties that the Government will take a public stakeholder share in LCR yielding a 35 per cent. share of the company's pre-tax surplus after 2020. The Government will also have a 5 per cent. stake in the Eurostar management company. This will be a public-private partnership with strong public accountability. Moreover, if LCR decide to sell the business, the taxpayer will share at least 35 per cent. of the proceeds. As I said earlier, these extra benefits should not simply balance the additional £140 million of public subsidy. This deal should provide that taken over the long-term LCR pays a premium to the Government.
"Under the original plan the concession was for 999 years. Eurostar was privatised forever. The parties have now agreed to reduce the concession to only 90 years. In 2086 this railway and the Eurostar service will revert to public ownership, along with the Channel Tunnel itself. I look forward to appearing before the House on that occasion to announce that event.
360 "There is one more point. I have negotiated a share for the Government in any savings of construction cost. I have also negotiated a mechanism to prevent any of the parties involved enjoying excessive windfall gains at the taxpayers' expense. In this way we aim to avoid any repeat of the fiascos which have marked railway privatisation.
"There is still much work to be done. Regulatory bodies must be satisfied. There will be many more months of negotiation on the detail. This is an agreement snatched from the ashes of LCR's collapse. The Channel Tunnel Rail Link will be built all the way to St. Pancras. Construction will begin this year. We will join the fast track to Europe. This is a deal which is good for integrated transport, good for the environment and good for the taxpayer. And it is good enough for me to commend it to the House".
My Lords, that concludes the Statement.
§ 4.14 p.m.
My Lords, I am grateful to the Minister for repeating this over-spun and well-leaked Statement made in another place by her right honourable friend the Deputy Prime Minister. The Statement is complex and the memorandum even more so.
As the Minister said, the project and the original CTRL Bill and its principles enjoyed cross-party support in both Houses. The project is indeed very important for the country and for the population of London where total unemployment still compares to that of Scotland and Wales combined. So Stage two is vital to London as well as to the rest of the country.
At what point does the Minister expect Waterloo International station to become saturated? Does she expect that to happen before or after the completion of Stage two? What guarantees can she give that Stage two will actually be built whatever the CTRL Act says? The Statement appears to criticise the previous government's assessment of the LCR bid. On what basis have the passenger projections now been calculated and will the Minister make that information public in due course?
Does the Minister agree that government exposure will not be the £140 million alluded to in the Statement; not £700 million, and not £1,200 million, but that the grand total of grant and guarantees will be £5.4 billion? How does that equate with the statement that this private sector will take a greater share of the risk? How is this commitment to be treated? If it is described as PFI, is it to be classified as public expenditure and will it appear in the Red Book?
Will not the "strong public accountability" in the Statement also incur increased responsibility, management and ultimately interference with the project? Can the Minister assure the House that neither LCR nor Railtrack will have any pretext to come back to the Government to ask for more public money in the future and if they do, will it be refused?
The Minister was kind enough to refer to the success of Heathrow, so well run by the privatised BAA. She referred to Britain's biggest bus station at Heathrow, serviced by Britain's privatised bus industry. Finally, 361 can the Minister say how much of Eurostar's new management company will be controlled by the state-owned French and Belgian railways?
In conclusion, we support the completion of the CTRL, but we shall have to look much more closely at the financial arrangements in order to determine their nature.
§ 4.17 p.m.
§ Baroness Thomas of Walliswood
My Lords, perhaps I should begin by congratulating not so much the Minister as the Labour Administration on their exceptionally successful media management in the run-up to this announcement. We were led to believe that something not very satisfactory was going to happen, but we are now told that something rather satisfactory is going to happen. It is probably a case of 10 out of 10 for that.
I am delighted to support the good news which is contained in the Statement. I am glad that the noble Baroness was able to repeat the Statement in this House so soon after it was made in another place. We share the Government's assessment of the importance of this project, not just for people who live in the South-East; not just for the ability to get passengers across to the Continent, but also because of its importance to freight and to the regeneration of the East Thames corridor. The scheme is important, therefore, on both environmental and economic grounds and well beyond the confines of the South-East itself. I hope that the assurances in the Statement that progress will be made in extending Eurostar's services beyond the South-East are well founded, and that the Minister can say a little more about that.
I am glad that the conditions of the original deal and Act with regard to completion of the entire project have been retained. I am particularly glad to welcome the fact that the Government have obtained, as it were, a stake in the company in return for the investment that is being made in the asset which is being created. This seems an extremely sensible example of public/private co-operation and very much in line with our own thinking on these matters.
Naturally, however, I have some questions. I think I am right in saying that the timing of the second stage into St. Pancras in effect amounts to a delay of some four years on the original estimate. That means that there will be quite a long period when Eurostar is competing for track space on the congested lines from north and east Kent into London. Can the Minister tell us anything about the operating schedules and whether they will be affected? I refer both to commuter traffic—those lines are already crowded at rush hour—and to the operation of Eurostar during that period of congestion. On that subject, have the recommended engineering reports on the feasibility of moving the terminal from Kings Cross to St. Pancras been undertaken?
I have another question on timing. I refer to the timing of the payments of the government contribution to the project. It is not clear to me from the Statement how the payment of the major contribution of £1.8 billion will be staged. I should be grateful for some details on that.
362 Finally, there is another problem to which reference has already been made. I refer to the balance of cost and benefit to the taxpayer of a share in the eventual success of LCR as opposed to the risk of backing a £3.7 billion bond issue. Can the Minister assure us that there is not now over-confidence in the eventual success of this project? I hope that that is not the case.
Having said all that, our first reaction is one of satisfaction that from the ashes of failure the Government have managed to construct something which looks as though it will be successful.
§ 4.22 p.m.
§ Baroness Hayman
My Lords, I am extremely grateful to the noble Baroness, Lady Thomas of Walliswood, for ending on such a constructive note and for her welcome of a deal which has been produced after enormous effort by many people and which reflects a partnership in which the House and the country can have confidence.
I must advise the noble Earl, Lord Attlee, that he is absolutely right that there was criticism implicit in the Statement of the scrutiny by the last government of the contract into which they entered. I suggest that that criticism was well based, given the collapse that we have seen and what has had to be rescued over the past few months.
It is rather churlish to criticise this as an over-spun and over-leaked announcement. What I was listening to and reading this morning was not the Statement that I made to the House this afternoon. One does not have complete control over the press getting things wrong, but it is a little unfair to be blamed for the fact that they speculate.
I shall try to answer most of the specific points put to me and I undertake to write on any that I have missed. I was asked about what guarantees there are about the second phase of construction. That interrelates with the question of the timing of the payment of public subsidy, which was raised by the noble Baroness. The two are interrelated because it is in the incentives as regards the timing of the payments of public subsidy that we believe lies the strength of the incentive for the completion of the whole project through to St. Pancras. Approximately one-third of the public subsidy will he payable on completion of the first phase to Fawkham Junction. None of that money will be payable until two-thirds of that construction work is completed. That means that two-thirds of the public subsidy of £1.8 billion will not be payable until we have two-thirds of the construction of the next phase to St. Pancras. The House will understand that those are strong financial incentives. There are also strong financial incentives for Railtrack in having a complete link as soon as possible in terms of its return on its capital.
The noble Earl asked me about capacity at Waterloo. My understanding is that we are confident that there will be sufficient capacity at Waterloo for the foreseeable future. We do not believe that, even on the most optimistic forecasts, there will be any capacity constraints before the development into St. Pancras is completed.
363 In an analogous question, the noble Baroness asked about the pressure that will be put on commuter lines into Waterloo. Once the Fawkham Junction section is complete, there will obviously be additional traffic on some of the lines into Waterloo, but I understand that Railtrack has undertaken to ensure that there are some improvements on that stretch of the line in the interim period before the complete link into St. Pancras is finished.
I was also asked about the forecasts of Eurostar business and passenger traffic, which are obviously key to this issue. As I said, those forecasts have been prepared for the Government by independent consultants in contradistinction to the previous government's acceptance of the over-optimistic projections provided by Eurostar. The Government's central case, on which the funding is based, forecasts for every year to 2010 10 per cent. less traffic than was implicit in LCR's forecast. Even on those lower passenger forecasts, this deal still stacks up financially. The House can be reassured that there is not the over-optimism that got us into this position in the first place.
The noble Earl suggested that the project would receive large amounts in public subsidy over and above the £1.8 billion and the possibility of an extra £140 million in subsidy which I have already explained with regard to Eurostar. In fact, the guarantees have been classified independently by the Office for National Statistics and vetted by the European equivalent agency. The Office for National Statistics has deemed that the possibility of the Government's guarantees as regards the bonds being called in is so remote that they do not score as public expenditure.
In view of the unique importance of this project, we have managed to provide a financing system which means that the project can be built at the least cost to the taxpayer rather than involving the taxpayer, as we were being asked to do originally, in £1.2 billion of extra expenditure simply to enable LCR to raise its money on the open market. I would have thought that the creation of a safe but innovative method to ensure that the link was built at the cheapest possible cost and the least demand on taxpayers' money would be something on which the Deputy Prime Minister and the negotiating team should be congratulated.
I described the consortium that would run Eurostar. A stake will be held by both the Belgian and French national railways. Those details are still being negotiated. I cannot say exactly what stake they will each hold, but I have made clear that the British Government will also have a stake and therefore public participation will be ensured. I hope that I have covered most of the points that have been raised, but I shall read Hansard and undertake to write to noble Lords if I have not covered particular points.
§ 4.30 p.m.
§ Lord Ampthill
My Lords, I thank the noble Baroness for repeating the Statement but hope that she will forgive my disappointment about some of its 364 contents. The Bill received Royal Assent 18 months ago. The intervening period has not been totally wasted inasmuch as the detailed plans have been completed. A start on construction could have been made 10 weeks ago but the money was not there. We are now faced with a completion date of 2007—four years later than contemplated and would have been achievable. The first phase is to stop at Ebbsfleet. Who other than those of us involved in this matter knows where Ebbsfleet is? The answer is that it is to be found in the top right-hand corner of Kent near the Thames. It is a wasteland and no one will wish to go there.
The proposed first phase appears to achieve a saving of a quarter of an hour in the Eurostar journey time from Paris and Brussels but virtually nothing else. The original concept had many more objectives: a saving of half-an-hour for Eurostar and, more importantly, the opening up of decent rail services for the people of Kent, using the new line, which would more than halve the journey time for commuters and others wishing to travel to London and beyond. It would also get Eurostar off the old, decrepit and clogged south-east network. A further benefit would be the provision of a gateway at Stratford East for the whole of the United Kingdom north of the Thames to gain rail access to Europe, whether it be people or goods.
I believe that there is little benefit in phase one on its own and a great deal of unpleasantness for those who live near the spur line from Southfleet to Waterloo—the people of Swanley, Bexley, Bromley and Beckenham—who were told by the Select Committee of this House that while there could be a brief period when the spur line might be overused because of the greater construction difficulties north of the Thames they would not have to put up with it for too long. They have been badly let down.
One suspects the dead hand of the Treasury in this unhappy compromise despite the kind observations in the Statement. Recently, there have been welcome signs that the Treasury has discovered the difference between capital and current expenditure. A huge infrastructure project such as this will never get done without heavy state help. PFI can go only so far. However, it is at last going to happen. Can the noble Baroness give the House some encouragement that her department will exert greater pressure to make a start on construction and urge a great deal more rapid completion?
§ Baroness Hayman
My Lords, the noble Lord. Lord Ampthill, raises a number of extremely well informed points, as the House would expect given his chairmanship of the committee which considered the Channel Tunnel Bill. Both I and the whole House share his concern that the project has been delayed. However, there was no point in trying to proceed with a project that was basically unsound and did not have a strong, solid foundation to ensure completion. That was very much the consideration which we faced in January in deciding whether we could make the deal work—it took four months of very intense negotiation, and further negotiation will be required to get the details right—or we should run the risk of having to start from scratch, adding at least two years' further uncertainty and blight, 365 with no guarantee as to the outcome, by re-tendering the whole project. We have taken another path that we believe has been successful.
The noble Lord has referred to the dead hand of the Treasury. I describe it as the imaginative and innovative support of the Government in financing a deal that makes this project work. I recognise the noble Lord's concern that there will be different completion dates for different phases, although given the nature of a project of this length it was always going to be built bit by bit. I point out to the noble Lord—it is one of the dangers of believing what is said on the radio and leaked in the papers—that the first phase to which Railtrack is committed in procuring the building and buying of the track at the end of it will not go as far as Ebbsfleet. It will go to Fawkham Junction and the spur into Waterloo. I understand that there will be concerns at both Ebbsfleet and further into London because of the very real additional benefits to which the noble Lord has referred: the regeneration possibilities at Stratford, at Ebbsfleet and in the whole Thames corridor. We shall have to wait a little longer for those benefits, but we have a robust framework in terms of both the management and financing of the project, which means that the complete link will be built.
§ 4.37 p.m.
§ Lord Redesdale
My Lords, I welcome the completion of this project, but can the Minister inform the House what plans are now being made to increase the capacity of King's Cross Underground Station? Once the project is completed there will be a vast influx of people who wish to use the Underground network from King's Cross. At the moment King's Cross is almost running at capacity and without further major works to accommodate the extra passengers there is a possibility that it will become dangerously overloaded. Are there plans to undertake large-scale development at King's Cross? Further, can the Minister inform the House about any engineering studies that have been undertaken at St. Pancras? Those who sat on the Select Committee dealing with the King's Cross inquiry a few years ago were told quite categorically that it was very unlikely that St. Pancras would be able to accommodate an international terminal without major works. What studies have been undertaken of the financial problems that will arise from that?
§ Baroness Hayman
My Lords, the noble Lord is right to point out that the implications for both St. Pancras and King's Cross must be carefully evaluated in terms of the links with the Underground and other transport systems. That integration between forms of transport is also one of the reasons why the potential links around Heathrow are particularly attractive as they would provide a variety of interchanges available to travellers and a number of ways in which they could gain access to the high speed link.
Another issue is Thameslink 2000 and the possibilities that that offers for commuter traffic at King's Cross and St. Pancras. Construction of the Thameslink 2000 station is included in the second phase 366 of construction. Both LCR and Railtrack will be discussing the full implications of that project with the department. I am sure that there will be further discussions with London Underground about the implications for Underground services at King's Cross.
§ Lord Biffen
My Lords, the Minister has very properly spoken of sacrifice in this major financial project. Will she confirm that part of the private sector contribution will be in terms of fixed finance? What is the assumed rate of inflation that will be absorbed in the arrangement?
§ Baroness Hayman
My Lords, in all honesty, I do not think that I can answer that at this moment. I undertake to write to the noble Lord and give him that information.
§ Lord Berkeley
My Lords, I congratulate my right honourable friend the Deputy Prime Minister on the creative and hard negotiations that he has been through. In my simple calculation, he started off with £700 million of possible cancellation charges, about which we did not know from the previous government until a few months ago when we raised the matter in the House. He has got that down to £140 million to keep it going. He deserves every congratulation. I have two questions for my noble friend. First I should declare that I am chairman of the Rail Freight Group. Obviously rail freight welcomes the link, not just for rail freight in particular but because more capacity will be opened up between London and the Channel Tunnel, and that is essential. I leave that to one side.
My main concern, like that of so many other noble Lords, is that the link should be completed to King's Cross. I hope that my noble friend will be able to assure the House that if it is possible to construct the link from the junction next to Ebbsfleet as far as Stratford that would not be bad. It is a stage and a half. Stratford is at least on the London Underground, the Docklands Light Railway, and so forth. It may take until 2007 to reach St. Pancras with all the opportunities for regional services that that will bring.
In many debates in this House we have raised the question of frontier controls on these trains. I hope that my noble friend will take the opportunity to look, with her colleagues in Customs and Immigration, to see whether there could be a more simplified procedure which does not involve segregated platforms at Stratford and St. Pancras for international and domestic trains. That is something that seems to be unnecessary in the rest of Europe. Finally, is my noble friend satisfied that there will not be undue market dominance on the London to Paris axis in the air, by coach and on the railway by BA and National Express? What action will she be taking to ensure that that does not occur?
§ Baroness Hayman
My Lords, I am grateful to my noble friend for his comments. On his last point, I believe I made it clear in the Statement that there are regulatory issues in this country and at a European level which will be subject to scrutiny. That is part of the detailed work that will have to go on during the next 367 weeks and months. Although he did not raise rail freight as a major point, it is important to stress that the link and the services will have direct and indirect benefits for rail freight, which are important at an international level. He mentioned security for passengers and security checks. That has always been an issue so far as concerns regional services and interchanges. I shall bear in mind his comments in what I am sure will be ongoing discussions on that subject.
My noble friend talked about the extension of the project at least to Stratford. I should make it clear once again that the contract remains unchanged and as it was under the Act; that is, a through route into St. Pancras. Lastly, he was right to make the point about the cancellation costs, which were not well understood at the time of the original agreement. He and my noble friend Lord Bruce of Donington drew attention to them in this House recently. My noble friend Lord Berkeley said that we could have been left with a bill of £700 million with nothing to show for it and that we would then be back to stage one in the negotiations. The only thing that he was wrong about is that the bill could have been nearer to £1 billion.
§ The Earl of Carnarvon
My Lords, the Minister will be aware that today, as chairman of SERPLAN, I published the strategic plan for the south-east, affecting 18 million people. I was at the press conference this morning. I found that the acting chairman of LPAC, Councillor Kallar, was extremely worried about the possibility of delays in development in the East End corridor and the connection with Stratford. That affects not just the people of London and the unemployed people of London to whom the noble Earl, Lord Attlee, referred; it affects everyone in the south-east. I suppose that housing in the south-east is probably the hottest potato that the Government have to handle. It is important for everyone concerned that the Government give local authorities throughout the south-east, particularly in the East End of London, confidence that there will be a connection to Stratford. I accept of course the Minister's remarks today, but I feel that her department should ensure that, with all the publishing that will go on in relation to the sustainable strategy for the south-east, that that point be endorsed and underlined.
§ Baroness Hayman
My Lords, I am grateful to the noble Earl for his comments. I recognise his long-standing concern over planning in the south-east. I acknowledge that there will be disappointment at the extended length of time for completion of the links into Stratford and St. Pancras. However, I believe that it is in the interests of all those people in London and the south-east who are looking for the regeneration benefits that will come from the Channel Tunnel rail link that we have in place a robust and secure managerial and financing arrangement that will in time produce the whole link, rather than an agreement which on paper, 368 would produce it sooner but which was, in fact, so unrobust that it was in danger of total collapse in January of this year.
§ Lord Inglewood
My Lords, I am sure that the Minister will agree with me that it is necessary for the well-being of north-west England that the west coast main line should be physically directly linked to the Channel Tunnel link. Will the Minister explain what, if anything, today's announcement does to bring that objective forward?
§ Baroness Hayman
My Lords, as I said in the Statement, the obligation in the development agreement for the provision of the infrastructure for direct regional services is the same as it has always been. My right honourable friend the Deputy Prime Minister recognises the importance attached by Members of this House and another place to putting regional services in place. That is why he has asked the consortium, which was chosen only today to operate Eurostar, to report to him by the end of the year on the viability of regional services.
§ Lord Desai
My Lords, I commend the innovative way in which the financing of £3.5 billion of bonds issued by LCR has been handled, but could I ask for a clarification from my noble friend? What happens to the risk on those bonds if LCR goes out of business or is bought up? Do the Government face any extra risk on that?
§ Baroness Hayman
My Lords, I am always nervous when I reply to economists' questions, whether they are from behind me or in front of me. I think I made it clear that if LCR were to be bought the taxpayer would have 35 per cent. of the proceeds. I made it clear also that the assessment of the Office of National Statistics is that the risk of the bonds being called in is so low that they do not count as public expenditure. Even on the lowest, most pessimistic forecasts—not the median forecast upon which the Government are operating—for Eurostar passenger traffic, there is still enough income to repay the bonds. With regard to the bond for the completion by Railtrack, the cost of that bond is covered because there is an undertaking by Railtrack to purchase the completed section as soon as it is built.
§ Lord Monson
My Lords, the Government are to be congratulated on securing a better deal than that trailed in the press in recent days, although, as pointed out by the noble Earl, Lord Attlee—a point not totally dispelled by the noble Baroness's answer to the noble Lord, Lord Desai—there are still risks to the taxpayer should anything go wrong.
Perhaps I may put a question to the noble Baroness which is germane to the Statement, although it may not appear so at first sight. I ask out of pure curiosity and certainly not to capitalise upon the awful tragedy which took place near Celle today. Which is statistically safer per mile travelled within western Europe—plane travel or train travel?
§ Baroness Hayman
My Lords, I can find that information for the noble Lord. There is always a 369 difficulty in comparisons between accident and fatality rates of different modes of travel when one compares aircraft with rail or car travel by per mile or kilometre travelled rather than per hour travelled. Off the top of my head, I should not like to give those statistics.
I think that the whole House would like to record the concern I am sure we all feel about the tragic accident in Germany today.