HL Deb 29 June 1999 vol 603 cc174-6

3.02 p.m.

Baroness Ludford asked Her Majesty's Government:

How a proposal to award a London Transport contract to Railtrack regarding sub-surface underground lines meets the requirements of European Union tendering rules.

The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty)

My Lords, I should stress that no contract has been awarded to Railtrack. My Statement of 15th June signalled the commencement of discussions with Railtrack. The Government's view is that, given the characteristics of the PPP contract and the special position of Railtrack, the negotiations with Railtrack now under way are consistent with the requirements of the EC Utilities Directive.

There is no question of our seeking to contravene the EC competition rules. We will keep the position under review as negotiations develop.

Baroness Ludford

My Lords, I thank the Minister for that Answer. However, in his Statement of 15th June he stated: We shall engage in negotiations immediately [with Railtrack] and we hope to conclude them as rapidly as possible". So, it seems that things are moving on.

I am not convinced by the Answer. Surely, this is a public works contract in the category of building and engineering works which falls under the directive. It was described in his words as being for the purpose of maintenance and upgrading of the sub-surface lines and building links between the undergrounds and national rail lines. Therefore, it is concerned with construction and infrastructure. Surely, only operating services for rail fall outside the directive. I therefore press the point that the EU competition rules should apply.

Lord Whitty

My Lords, clearly the EU competition rules have to be taken into account in relation to any such contracts. However, our understanding is that, because the principal aspects of this contract would come under Part B of the EC Utilities Directive, the full EU competition rules would not apply. If further clarification during negotiations with Railtrack leads us to a different conclusion, we shall have to take different action, but that is our current understanding.

Lord Pearson of Rannoch

My Lords, would it not be more sensible to leave the outcome of these negotiations to London Transport and Railtrack and not involve the European Commission, which, after all, has recently been shown to be one of the most corrupt bureaucracies on the face of the planet?

Lord Whitty

My Lords, I appreciate the noble Lord's views on these matters. However, we are bound by treaty to observe the competition rules. The Question raised by the noble Baroness is whether the full tendering procedure would apply in this particular case. Our view is that it would not. If the negotiations were to show that we fell under those rules, I fear we would have to obey them.

Lord Bruce of Donington

My Lords, is the noble Lord satisfied that the European Union tendering rules are applied evenly among all the other member states?

Lord Whitty

My Lords, this is some way from London Underground. Nevertheless, our information is that the rules are observed at least so far as one can view the tendering procedures. All contracts which fall under those rules are advertised across the European Union. We believe that is the case in all member states. As regards how the contracts are awarded, I would need to return to that, but the rules and procedures are certainly observed.

Baroness Thomas of Walliswood

My Lords, irrespective of whether or not this particular contract falls under the rules, which I think is in dispute, is not it desirable to have the best possible contractors to carry out whatever processes need to be carried out on our infrastructure? Is not that better done through a process of open contracting than by negotiations with a single potential partner? Finally, with respect to the other contracts to be let by London Underground, can the Minister assure us that full, open contractual processes will be undertaken within or without the rules of the European Community?

Lord Whitty

My Lords, as far as the two other groups of lines are concerned, we intend to submit them for open tender. As concerns Railtrack and the sub-surface lines, we believe that there is considerable potential benefit in terms of services into London to be gained through integrating those lines with the overground lines which Railtrack owns. We are exploring those potential benefits. If they prove to be there, we will negotiate a contract with Railtrack. If they are not, clearly we will deal with this group of lines in the same way as the others.

Lord Archer of Weston-Super-Mare

My Lords, can the Minister explain why, over the past two years, his department has continually run down Railtrack as a company and then offers it an exclusive contract for London Underground?

Lord Whitty

My Lords, I do not believe that the performance of Railtrack requires the Government to run it down. There have been some severe failures in terms of the operation of the infrastructure of what was British Rail. We believe that a number of improvements are now entering into Railtrack's operations. We consider that tighter rules are required in that respect. We shall shortly introduce legislation to achieve that end. Nevertheless, Railtrack is the source of an enormous amount of expertise in this area. There are great potential benefits in integrating the sub-surface lines with other lines which come into London and are currently controlled by Railtrack. It is therefore in the interests of Londoners that we explore such possibilities to the full with Railtrack.

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