Transport Bill (Hansard, 30 October 2000)

HL Deb 30 October 2000 vol 618 cc748-80 748

§ Further consideration of amendments on Report resumed on Clause 206.

§ Lord Berkeley moved Amendment No. 240: Page 121, line 17, at end insert— ("( ) In considering any proposals relating to or that may affect the carriage of goods by rail, the Authority shall consult all such persons—

(a) providing services for the carriage of goods by rail, and
(b) having any other interest in the carriage of goods by rail, as appear to it to be appropriate.").

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§ The noble Lord said: My Lords, in moving this amendment, it may be for the convenience of the House if I speak also to Amendment No. 246 in the name of the noble Lord, Lord Freeman, and Amendment No. 248 in my name.

§ On Amendment No. 240, noble Lords will recall that I tabled an amendment in Committee proposing a rail freight council to act as the formal consultative arrangement with the SRA and anyone else in respect of rail freight customers, mirroring as far as possible the workings of the rail passenger council. I shall not repeat what I said in Committee about the need for such a body. My noble friend Lord Whitty said in response: Freight services tend to be used by private companies that are better placed to represent themselves and to take up complaints directly with the freight operator concerned.—[Official Report, 17/7/00; col. 718.]

§ My noble friend is right in one sense. However, the other problem is that in the railway industry, size matters. Railtrack is very much larger than the train operators, and that shows; and the customers are generally very much smaller than the train operators, and that shows. It is important to set up a consultative arrangement between the SRA and those that are not licensed train operators, those that might be in future, or other customers. My noble friend was very nice about me personally, but, of course, one does not make legislation around people.

§ Having consulted widely in my own industry—I declare an interest as chairman of the Rail Freight Group—I proposed an alternative version to the amendment, requiring the Strategic Rail Authority to consult widely as appropriate. That would avoid the cost to the rail freight council and means less bureaucracy. In the present circumstances, the industry needs some such provision.

§ I accept that the wording of my amendment is probably not entirely satisfactory. I hope that my noble friend the Minister may say that he will take it away and consider it. He may even say that he will include something along these lines in the Secretary of State's directions to the SRA. The industry believes that it can grow as is envisaged in the 10-year plan, but it needs the ability to be consulted, as of right, by the SRA on matters concerning rail freight.

§ I support the proposal in Amendment No. 246 in the name of the noble Lord, Lord Freeman. I do not know when the Strategic Rail Authority will publish its strategy, but I have heard rumours that it may be delayed until the new year; I do not know why. I find it extraordinary that the SRA cannot produce a strategy before then. The Government published their 10-year plan in July, and I should have thought that three months was an adequate time in which to produce a strategy. Certainly, the rail freight industry would very much like a rail freight strategy, whether or not it is published at the same time as that of the SRA. If the amendment of the noble Lord, Lord Freeman, is to achieve the more regular publication of a statement of policy and strategy, as well as that for financial assistance, I believe that it deserves every support.

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§ I turn, finally, to Amendment No. 248, which is very much a probing amendment. I welcome the new clauses in the Bill and the intentions about rail freight grants, but both I and my colleagues are confused about how the grants will be paid regarding flows of rail freight between England and Scotland. It is quite clear that grants for flows in England will be paid by the SRA out of DETR funding and that grants for flows within Scotland will, similarly, be paid for by the Scottish Executive out of Scottish funding, block grant, or whatever.

§ However, there is a little confusion regarding the position between England and Scotland. For example, are the freight facilities grants paid in whatever location they need to be spent? The answer to that question is probably yes. But what about the track access grant, which is the grant for so many miles in each country? Will it be split on a mileage basis, or in some other way? The SRA has started a consultation process on grant schemes covering different types of grant. Can my noble friend the Minister say who will provide the grants, who will assess them and where the money will come from both in England and in Scotland? I beg to move.

§ Baroness Thomas of Walliswood
My Lords, I should like to express my support for this group of amendments, especially Amendment No. 240, which seems to me to represent excellent good sense. One of the principal objectives of an integrated transport plan is the transfer of more freight from road to rail. Many different companies and authorities will need to play their full part in that process, otherwise it will not happen. There is one large company among the rail freight companies, but there are quite a few much smaller companies. It seems to me that it would be extremely sensible for the SRA to have such a group of companies with an interest in the carriage of goods by rail, which could act as a sounding-board to ensure that the polices really do fit the bill.
I certainly hope that the Government will give some consideration to this amendment. The noble Lord, Lord Berkeley, described how he asked for something a good deal more specific in Committee, but now he asks for something more generalised. However, it will be of great value. I hope that the Minister will be able to give it some consideration.

§ 8.45 p.m.

§ Lord Freeman
My Lords, I, too, wish to support the noble Lord, Lord Berkeley, and the noble Baroness, Lady Thomas, as regards Amendment No. 240.I shall also speak to Amendment No. 246, which is tabled in my name and forms part of this group. Should those on the Government Front Bench think that there is all-party collusion on the matter, I should point out that that is not the case; indeed, we all just happen to agree on the same principles and to be of similar mind on the subject.
The purpose of my amendment is to ask for the SRA to produce a regular annual statement on its freight policy. Indeed, we still await the first overarching 751 statement on freight. It is disappointing that it may well be postponed until the new year. However, I hope that we shall see it sooner.
As the noble Baroness, Lady Thomas, said, we all want more freight shipped by rail, but we must not be too starry- eyed about it. Doubling the amount of rail freight over the next 10 years, which is what the English, Welsh and Scottish Railway Company hopes for, will simply be equivalent to the growth over two or three years in good years of road freight—I see that the noble Lord, Lord Berkeley, seems to disagree with my figures. That is not to say that I do not fully support any move to increase rail freight, but we must still be realistic about the situation. We are not a central or eastern European country, where 30 per cent to 40 per cent of freight is shipped by rail: it is in the low single figures in this country, and should be very much higher. Nevertheless, we must surely congratulate the EWS on achieving a 30 per cent increase in rail freight since privatisation and support the company in its aspirations for growth, although it is disappointing to note that the amount of rail freight—not road freight—through the tunnel fell by 6 per cent last year and the omens for this year are not necessarily as good.
How can we improve upon the situation? As president of the British International Freight Association, I have already conducted the consultation which the noble Lord, Lord Berkeley, has requested—I was about to call him "my noble friend": well, he certainly is my friend on this issue. I have consulted our membership about what are the crucial factors that would encourage more use of rail freight. I received two simple answers and will send the results of the survey to the noble Lord, Lord Macdonald, as they may well be of interest both to him and to some of his officials. The two critical issues were: reliability and frequency, and, interestingly, not speed. To achieve this, we need to take at least three steps, which should not cost any cash, and three steps that would. Perhaps I may summarise them for noble Lords, as that is all I can do in the time available.
First, the noble Lord, Lord Macdonald, should be encouraged to continue with what he has already started; namely, to press the Commission to liberalise rail freight in Europe even further. A good start has been made and interoperability, which is the aim of the Commissioner, must be encouraged. I suspect that the noble Lord is almost a lone voice in the Transport Council on some rail liberalisation issues. If he is not, he is only supported by two or three other countries. The Government's leadership is important in such matters.
Secondly, we must permit faster night freight on the new Channel Tunnel rail link line—a campaign that has been running now for several years. It still does not look as if it has been resolved, but is something that I believe to be vital. Incidentally, the latter is not about speed; it is about getting capacity for freight through the rail link during the night, while it is largely dedicated for passenger use during the day. Thirdly, 752 we must require freight to be properly provided for on the new West Coast mainline. I am still not convinced that that is the case.
I turn next to three issues that I very much hope to see reflected in these annual statements from the SRA. The first is cash from the taxpayer that will help to pay for new rail terminals. One terminal a year might be a modest contribution to our economic well-being. Secondly, we should help to build new dedicated freight track. Let us not kid ourselves: freight and passenger trains do not mix comfortably. They certainly do not complement each other in terms of the wear and tear on track. Finally, there must be help to enhance the loading gauge— which means the size of the tunnels—for continental gauge.
Although I speak as a Conservative, I am a firm believer in a more substantial rail investment. I have long argued for that. I believe that the cost of this additional investment in rail freight infrastructure can be justified by the social and environmental benefits in the same way as new roads are. To that extent, it is justified. If the Minister cannot comment, I look forward to some comment by the Strategic Rail Authority in regular annual statements.

§ Lord Whitty
My Lords, my noble friend Lord Berkeley substitutes his previous concept of a rail freight council with a broader requirement for consultation. I fully agree that the rail freight industry needs to be aware of matters affecting it and to have the opportunity to comment on the SRA's strategy. With regard to the remarks of the noble Lord, Lord Freeman, I also agree that if a freight industry is to meet the targets that we look for in the 10-year plan it is also not acceptable for freight parties to have to rely on the goodwill of the passenger operators to alert them to relevant matters and to provide the required priority on the track.
There may have been some failings in the past. They need to be addressed, as well as the important and substantial infrastructure issues on increasing the capacity of the track, to which the noble Lord, Lord Freeman, referred. However, providing it in the terms of the amendment would not necessarily be appropriate. But I can give some comfort: our directions and guidance to the SRA will cover consultation on material matters with the freight industry. We shall consider carefully how the needs of the freight industry are met when we issue these directions and guidance and consult with the freight industry on the draft of the directions and guidance. Without going as far as my noble friend wishes on the face of the Bill, I hope that that gives him substantial reassurance.
On Amendment No. 246, again the SRA has a duty under Clause 205 to formulate, keep under review and publish strategies with respect to its purposes. The intention is that it will do so on a regular basis. These purposes include promoting the use of the network for the carriage of goods. The SRA's budget will be published in the normal way and it will publish an annual report. The noble Lord will understand that the SRA's expenditure on freight will depend in large part 753 on the grant applications it receives. Therefore, it is not that easy to be precise on the forward pattern of expenditure. The shadow SRA has consulted on the principles of a new grant scheme. The provisions I have outlined should give proper information and accountability and, therefore, the framework to potential freight operators and freight users on the overall strategy to be adopted by the SRA. I believe that that meets to a large extent the spirit of the amendment.
Amendment No. 248 deals with the issue of freight proposals which require grants across the Scotland-England border. I do not think that the amendment is helpful but some clarification may be helpful. The SRA will draw up schemes for freight grants. Once drawn up, the Scottish Executive will administer them within Scotland. The amendment refers to the provision in Clause 210 which makes such grant administration in Scotland solely a matter for the Scottish Executive. It would not be possible, therefore, for the SRA. to take the sole lead where a scheme impacts on Scotland, nor for the Scottish Executive where it impacts on England. The simple fact is that we cannot enforce co-operation but we are providing the framework whereby both authorities can work together on a scheme that they consider worthwhile.
As regards funding, the Scottish grants will be paid for from the Scottish Consolidated Fund if they are made under the SRA's notified schemes.
I am confident that we shall continue to need cross-border schemes and that they will continue to be administered effectively after the Bill is in force and after the powers of the SRA are in place, and the need for co-operation on such schemes with the Scottish Executive is clear. In the light of those assurances, I hope that my noble friend will not press the amendment.

Lord Berkeley
My Lords, before the Minister sits down, can he clarify his statement on grants? He is right about the amount of budget depending on the grants received. But is it not true that a significant amount of funding in the 10-year plan is for infrastructure grants for freight which could be paid directly from the SRA to Railtrack? In those circumstances, I should have thought that the budget for that would have been set by the SRA in consultation with Government rather than waiting for applications to come in. Is that correct?

§ Lord Whitty
My Lords, under the change provisions, that will be broadly correct. The grants to which I refer relate to grant applications from the freight operators themselves. That is less easy to estimate substantially in advance.

Lord Berkeley
My Lords, I am grateful to my noble friend and thank him for his explanation of Amendment No. 240 which will give great comfort to the rail freight industry. I look forward to seeing the instructions from the Secretary of State to the SRA. I beg leave to withdraw the amendment.

§ Amendment, by leave, withdrawn.

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§ Lord Berkeley moved Amendment No. 241: Page 121, line 17, at end insert— ("( ) In exercising its functions in accordance with subsections (1) and (2) the Authority shall produce regular reports on the performance of all railway passenger services.").

§ The noble Lord said: My Lords, the amendment would require the rail passengers council to report on the reliability and performance of all services in the UK including Eurostar, Heathrow Express, London Underground and other metros.

§ The issue was discussed in Committee. At col. 706 of the Official Report of 17th July, my noble friend Lord Macdonald said in respect of non-franchised services that, There will not be the same public interest, in a regulatory sense, to put a requirement on the authority to publish performance information on a statutory basis". I believe that he is right in one sense. The key is the regulatory sense. But a passenger does not mind what contract or franchise the operator has; he wants to know about the reliability of the trains. If there is performance information for most trains in the UK, it should be done for all. At present, Eurostar and Heathrow Express are discrete services. However, if terminal 5 goes ahead, there may well be services from Heathrow to Birmingham, Waterloo or Reading. Does the inclusion of performance information of such future services depend on whether they are franchised or let in some way? Will passengers understand the difference?

§ I seek a commitment from the Government that this should be a desirable objective. I am sure that the amendment is drafted defectively. But a principle is involved and a commitment to consider the issue in future. I beg to move.

§ Baroness Thomas of Walliswood
My Lords, I have put my name to the amendment, and support it.
The noble Lord, Lord Berkeley, hoped for services which may one day link Heathrow with the remainder of the United Kingdom rail services. That was one of the conditions by BAA as a sweetener for the creation of terminal 5. If they are not forthcoming, there will be a lot of angry people.
The conditions under which a service is supplied does not matter to the passenger; what matters is the quality of that service. It is necessary for people to have a concept not just of a railway, but of the whole pattern of rail travel and services Nothing would give passengers greater confidence than to feel, with reason, that the quality of rail services was improving steadily. We hope that that would be a result of having a strategic rail authority and regular reports on the quality of services.

§ 9 p.m.

§ Lord Whitty
My Lords, it is important that the SRA publishes an indication of the performance of passenger train operators. Whether all passenger services, including non-franchised operations, should be subject to the same requirement is a more difficult matter. The SRA has the power to require franchised 755 operators to provide that information and to produce it in the terms prescribed by the SRA because those operators are dependent on it for the franchise. There is an entirely different situation in regard to Eurostar and the Heathrow Express. I do not believe that a requirement that they provide such information would be workable. Clearly, it is within their own interests to produce such information and to convey it to the public in the same form as the information that is provided to the SRA, but the requirement must relate to the franchise. That is why I believe that the amendment of my noble friend is misplaced.

Lord Berkeley
My Lords, I am pleased to hear my noble friend say that it is clearly in the operator's interests to give such information to the passengers. I hope that he is right, but I also hope that that is another item that will be in the instructions to the SRA, even if on a voluntary basis. I am sure that many noble Lords, and people outside the House, will encourage the operators and the SRA to acquire such information and to publish it, even if on a voluntary basis. I am grateful to my noble friend for that clear explanation. I beg leave to withdraw the amendment.

§ Amendment, by leave, withdrawn.

§ Lord Brabazon of Tara moved Amendment No. 242: Page 121, line 19, leave out ("and any investment in bodies corporate by it").

§ The noble Lord said: My Lords, in speaking to Amendment No. 242, I shall speak also to Amendment No. 247. Clause 206 gives the Strategic Rail Authority power to invest in bodies corporate; in other words, other commercial concerns. This amendment would remove that power.

§ The authority is supposed to be a strategic planning body, so why on earth is it taking shares in companies? Nothing in Clause 204, which deals with purposes, or in Clause 206, which concerns the manner of exercise of functions, suggests that that is necessary. In short, there is no discernible need for such investment in order for the authority to perform its functions. Worse still, to acquire shares in that way could give rise to serious conflicts of interest. In relation to that noble Lords have only to look at Clause 206(3) which states that the authority shall have regard to, (a) the need to protect all persons from dangers arising from the operation of the railways", and at paragraph (b) which talks about the disabled, and paragraph (c) which covers the environment.

§ On all those issues there is a balance to be struck. Without the impediment of a financial interest, the authority would not be compromised. On Amendment No. 313 we shall discuss lightweight cement tankers that may not be robust enough for their duties. A properly organised and planned competition may be one thing, but an ill-judged investment would be something else.

§ In Committee the Government said that the SRA needs the flexibility to invest in a railway. However, we believe that that flexibility will leave the authority 756 vulnerable. Business will be aware that the authority can invest and will naturally take advantage of that. It is important that noble Lords remember that Clause 210 allows the authority to make grants and loans and to give guarantees but those powers do not compromise the authority's clear-headed strategic thinking. I beg to move.

§ Lord McIntosh of Haringey
My Lords, the good news for the noble Lord, Lord Brabazon, is that I do not believe that this amendment is unnecessary; the bad new is that I believe it to be dangerous. It would remove from the SRA a specific power that we have given to it so as to ensure that it has all the powers that it needs to improve the railways. We have sought to ensure that the SRA can be as flexible and, therefore, as effective as possible.
We intend the SRA to be a player. Its main role will be as the funder of the franchised network, but as well as that core of services we want the network to grow and to be improved, and we want the SRA to play an active role in such improvements. In order to do that, the funding powers of the SRA need to be flexible so that they can react to any circumstances where they may be needed. The SRA will play the traditional role of paying out grants, but there are other more imaginative and potentially more effective models.
The SRA may want to become involved in a joint venture in which Railtrack, the train operators, construction companies, finance houses and the SRA could participate to deliver improvements. Equally, the SRA may want to put capital into a company. There is nothing unique in the idea of investment in projects that may help to lever in private funding. I am astonished that the Conservative Opposition should believe that there is. Such investments can provide a degree of assurance to investors and can help to give support where the investment is not likely to provide returns in the short or medium term. For capital infrastructure, all the investment may need to be upfront and the payback can be decades later.
I simply do not understand what the noble Lord, Lord Brabazon, talks about when he refers to a conflict of interest. He will have to give the House some examples if we are to take that argument seriously.
The shadow SRA's forthcoming strategic plan will set out the principles of investment support from the rail modernisation fund, and it will describe the forms of support that will be available. We shall be as transparent on this issue as we hope to be on all other related issues. I hope that the noble Lord will not press the amendment.

§ Lord Brabazon of Tara
My Lords, I certainly shall not press the amendment tonight. In his reply the Minister has given me considerable food for thought. He says that the amendment is not only unnecessary but dangerous. I suppose that is better than being told, as one often is, that the amendment is unnecessary. He also says that he requires the flexibility that this clause 757 would give the authority, in that it can do things other than just paying grants and it may want to put money into schemes.
We are talking about taxpayers' money. In general terms, the record of taxpayers' money being invested in what I may call "money-making wheezes" is not usually a good one. I only hope that the authority considers matters most carefully before taking advantage of the power that the Minister has described and that we, the taxpayers, do not find ourselves investing in schemes which have no chance of making money, as has happened so often in the past. I beg leave to withdraw the amendment.

§ Amendment, by leave, withdrawn.

§ Baroness Thomas of Walliswood moved Amendment No. 243: Page 121, line 30, at end insert— ("( ) In exercising its functions in accordance with subsections (1) and (2) the Authority shall have regard to the local transport plans prepared by local transport authorities in accordance with section 107.").

§ The noble Baroness said: My Lords, I rise briefly to move Amendment No. 243, standing in the name of my noble friend Lord Shutt of Greetland, and to speak to the other amendments in the group which also stand in his name.

§ Amendments Nos. 243 and 244 are straightforward. They state that the authority shall have regard to local and regional transport plans. That seems to be a matter of simple good sense. Local transport plans in particular are the main way in which the Government's general policies for transport are expressed. It is obviously most important that both sets of plans should be taken into account. There should be discussion between regional and local planners and the Strategic Rail Authority so that the two big planning bodies are not out of kilter at a local level.

§ Amendment No. 245 concerns publication of the Secretary of State's or Scottish Ministers' directions or guidance to the Strategic Rail Authority. Again, I hope that that is seen in the spirit of freedom of information. Perhaps the Minister can tell us whether it is or whether it falls under the caveat that advice is not to be published. On the other hand, that caveat applies to advice to Ministers, whereas the advice referred to in this amendment is from Ministers.

§ I must confess that the true meaning of Amendment No. 284 escapes me. As my noble friend Lord Shutt did not have time to brief me—everything having happened in rather a hurry—I hope that the Minister can explain to us its meaning and his response to it. I beg to move.

§ Lord Whitty
My Lords, first, perhaps I may deal with Amendment No. 284, as to which the noble Baroness has asked me to play on both sides of the net. The amendment deals with the relationship of the Strategic Rail Authority with the PTEs. It would delete the provision that the SRA need not comply with a PTE statement when that places extra costs on 758 the SRA. We resist that proposal for the fairly obvious reason that it would make the SRA do something outside its control while, at various points during this process, the PTEs have substantial powers to influence the decision of the SRA. I hope that that explains the position in relation to this amendment.
Amendments Nos. 243 and 244 concern the need to relate the SRA's strategy to the local transport plans. Indeed, as the noble Baroness said, it is very important that those two processes interrelate. Our guidance on local transport plans already deals with the relationship with national rail planning, and the planning guidance notes cross-refer to the SRA. Therefore, I believe that that interrelationship is already provided for under existing guidance and that the spirit of the amendment is met.
So far as concerns Amendment No. 245, I have some cause for quarrel with the noble Baroness. That amendment would require directions and guidance from the Secretary of State to the SRA to be laid before Parliament in advance of their being issued. We do not consider that suggestion to be appropriate. Under the present regime, although the objectives are laid before Parliament, the instructions and guidance—the equivalent of this amendment—are not. Where the objectives are laid down in the Bill, the new directions and guidance will correspond to the old instructions and guidance. We believe that they should be dealt with in the same way, subject, of course, to the requirement on the SRA to consult before we reach that point.
I accept that it is awkward for noble Lords to take my word on this matter before they have seen the draft guidance to the SRA. Obviously the timing is not ideal. However, I can assure the House that we shall consult on that guidance later this year. For example, local authorities and others with an interest will have a full consultation role in the drawing up of those directions and guidance. However, to require all such guidance to be laid before Parliament would not be in line with the way in which we have dealt with these things in the past or with the arm's-length relationship that the SRA needs to have with Ministers. I hope therefore that the requirements on the SRA to consult, to report and to publish its strategies will be sufficient to meet what I believe is the basic objective behind the amendments.

§ 9.15 p.m.

Lord Berkeley
My Lords, before my noble friend sits down, did I hear him say that he was going to consult the industry on the instructions and guidance to the SRA but was not going to inform Parliament? I do not think that was what he meant but that is the way it came across to me.

§ Lord Whitty
My Lords, either I convoluted two sentences or the noble Lord is not following me with his usual acuity. We shall consult on the guidance to the SRA as to how it should carry out its functions and whom it should consult in so doing. However, we would not lay before Parliament the instructions and guidance that are mentioned in the measure we are 759 discussing. It would be rather unusual for us to do so and certainly has not been the case under the current franchising regime.

§ Baroness Thomas of Walliswood
My Lords, I thank the noble Lord for that reply, which I am sure that my noble friend and the noble Lord, Lord Morris of Manchester, will read with great interest as the amendments came from that source. I hope that the House will be glad that, however unusual the procedure I have adopted, we have managed to discuss four amendments in seven minutes and have been given a good answer for the record. In the meantime I beg leave to withdraw the amendment.

§ Amendment, by leave, withdrawn.

§ [Amendment No. 244 not moved.]

§ Clause 208 [Directions, guidance and advice: supplementary]:

§ [Amendments Nos. 245 and 246 not moved.]

§ Clause 210 [Financial assistance etc.]:

§ [Amendments Nos. 247 to 249 not moved.]

§ Clause 211 [Securing of services by franchising]:

§ Earl Attlee moved Amendment No. 250: Page 123, line 36, at end insert— (""(2C) The Authority shall not exercise its powers under subsections (2A) and (2B) unless necessary for the purpose of exercising its powers under section 30(1)(a)."").

§ The noble Earl said: My Lords, in moving Amendment No. 250, I wish to speak also to Amendments Nos. 251 and 257. The Government claim that they are strengthening the franchising provisions by requiring the SRA to say where franchises should be franchised rather than just be eligible for franchising. However, it is difficult to see the difference. Surely the SRA is unlikely to designate a service as eligible unless it thinks that it ought to be franchised.

§ In Committee, the Minister argued that this amendment seeks to tie the provisions for designation to the role of the SRA as operator of last resort. That is nonsense. It seeks to tie the provisions for revocation of designation to that role, and rightly so. The Government argue for flexibility in changing the designation map. Why is that?

§ The bias should be in favour of franchising if the Government are sincere in their protestations that they are not interested in renationalising the railway network and the only changes should be new designations or as operator of last resort.

§ I turn to Amendment No. 251. This is a simple amendment. There is a gap in the Railways Act 1993, in that the franchising director is to designate services as eligible for franchising and is responsible for any invitation to tender in respect of such services but is not apparently obliged to issue any invitation to tender for such services. The relevant section is Section 26 of the 1993 Act. This amendment is designed to impose such an obligation on the authority (as successor to the franchising director).

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§ I turn to Amendments Nos. 252 and 253. Section 26(1) of the Railways Act 1993 allows the Secretary of State, when the authority selects a franchisee, to direct otherwise. This amendment removes that power. The Secretary of State should not be able to substitute his choice of franchisee for that of the authority. That would lay him open to the charge of appointing one of his friends, especially as he also takes under subsection (3) of Clause 211 the power to direct how the appointment is to be made, so that the proper tendering process can be bypassed. This provision has proved not to be necessary and, given that it is open to abuse, should be removed.

§ If my Amendment No. 252 does not find favour, perhaps I can tempt the Minister with my very attractive Amendment No. 253. Subsection (3) of Clause 211 gives the Secretary of State wide powers not only to substitute his choice of franchisee for that of the authority but also to dictate the method of selection of the franchisee. Amendment No. 253 limits the power of the Secretary of State to prohibit the authority's choice of franchisee to occasions where he has evidence that the person selected is not a suitable person to be a franchisee. What other reason would the Secretary of State have for interfering? In this case we believe that the authority should give the franchisee to another tenderer or re-tender.

§ In Committee, the Government argued that the SRA may need the right to obtain the authority of the Secretary of State to ignore the tendering process. On what basis should the authority be entitled to flout the tendering process? Surely the proper approach, if no person meets the specified criteria, is to re-tender, inviting the preferred operator to tender if he has not done so in the first round. If that does not overcome the problem, the authority could operate the service itself but only as a last resort. There is little point in choosing someone who is not even interested enough to tender, and to do so must give rise to suspicion of abuse.

§ I turn to Amendment Nos. 254, 255 and 256. Subsection (2) of Clause 211 of the Bill inserts new sections into the Railways Act 1993 that enable the authority to vary or revoke designation of services as eligible.

§ We believe that the authority should not have carte blanche to remove sections of the railway system from the franchising process. Such power should only be used in the circumstances where the authority is permitted by the Bill to provide services direct or to secure provision of them. Thus, a new power given to the authority to revoke designation of services as eligible for franchises could only then be used where no tender is received on the second time of asking. There could be some very simple reason why no tenders have been received. One ought not to resort to the sledgehammer when slight changes could result in tasty wholenuts being received in the form of viable tenders.

§ My final amendment in this group is Amendment No. 257. I do not intend to move Amendment No. 258. Subsection 211(5) inserts a new Section 30 into the 761 1993 Act. Subsection 30(b) allows the authority to provide services direct when a franchise comes to an end and no new franchise agreement has been entered into. This gives the authority the power to provide all services direct by not renewing the franchise agreements when they expire. The amendment limits these powers to an interim period before a new franchise is granted or no tenderer can be found.

§ Assurances from Ministers that there is no intention to re-nationalise the rail network ring hollow when such wide powers are included in the Bill. The circumstances in which they can be exercised should be spelled out.

§ When opposing this amendment the Government protested that there must be an alternative structure to last resort operations. It is agreed that something must be done, the issue is when it becomes a matter of last resort. This amendment is designed to ensure that the SRA does not just take over the service when a franchise has expired without bothering to re-tender or not doing so for a very long time. Doing so would hardly qualify as a "last resort".

§ The Government argue that a re-tendering process is implied, but where is it implied? Designation as a service that "should" be franchised can be revoked by the SRA. Sadly, my Amendment No. 250 may not find favour. This does not need a direction from the Government—that is only required if the Section 26A or Section 26B procedure is adopted and that can be by-passed by the "de-designation" process. I beg to move.

§ Lord Macdonald of Tradeston
My Lords, the amendments to Section 26 in Clause 211 are important provisions and I welcome the opportunity to explain them again.
To summarise, the Bill provides the assurance of a competitive process either by a formal invitation to tender at the expiry of an existing franchise or an equivalent process. This process must be flexible enough to deal with mid-term franchise replacement exercises such as that currently under way and to ensure that the trains do not stop running if there is no private sector response or an inadequate private sector response to competition. The amended Section 26 is the detailed machinery for this. It provides a safety net that spells out in detail what happens if the franchise process fails. There has to be a public sector capability to act as the operator of last resort.
I do not expect my words to dispel the Opposition's unjustified concern that the amended Section 26 is there to facilitate re-nationalisation by stealth, but I will try. The amendments in Clause 211 to the franchising procedures in Sections 23 to 30 of the Railways Act (addressed in Amendments Nos. 254 to 258), substantially maintain the current position under that Act. Among other things, the 1993 Act already enables the British Railways Board to compete with the private sector for franchise opportunities, and the Secretary of State to dispense with a formal invitation to tender exercise.
762 So the provisions on last resort operation are written out in full to reflect the intended dissolution of the British Railways Board. They require extensive procedures to be followed before they can be activated and cannot be used with an intention to re-nationalise the railway industry.
Amendment No. 250 seeks to link the franchise designation process to the authority's last resort operating powers. In fact, the new powers to designate franchised services in Clause 211(1) and (2) ate freestanding and have been amended to facilitate the process of franchise exemption. All currently franchised services will remain designated but the SRA will be able to revoke and replace existing designation to reflect, for example, modifications of the franchise map.
I am grateful for the opportunity afforded by Amendments Nos. 251 to 253 to speak to the intention of Clause 211(3) of the Bill. Noble Lords will know that the franchising director is currently in the process of negotiating replacement franchises of up to 20 years. The purpose of that is to secure better services and more investment sooner rather than later. Improvements are sought to safety, performance, customer service, innovation and investment.
He is doing so in an exercise which is very close in substance to the tendering process laid down in the 1993 Act. But there are upwards of three years to run on existing franchises and the franchising director cannot force an unsuccessful incumbent to hand over the keys to a franchised service before the expiry of the franchise term. Because of that, it can be argued that the process, although highly competitive, does not technically constitute an invitation to tender procedure as specified in Section 26 of the Railways Act.
Before letting a replacement franchise, therefore, the franchise director proposes to obtain a direction from the Secretary of State under Section 26 of the 1993 Act which allows him to award the replacement franchise without being at risk of an unsuccessful tenderer arguing that the process conducted by the franchising director was not compliant with Section 26. The instructions and guidance given to the franchising director in September 1999 anticipated a direction under Section 26(1) in the event of a successful franchise replacement exercise and directions have been given to the franchising director in respect of the Chiltern and South Central franchises.
We are not, therefore, amending Section 26 to give the Secretary of State any broad new powers, since he can already direct that the invitation to tender procedure be set aside. We are amending Section 26 because we consider that it could be improved and the process made more transparent.
For example, the process does not currently specify how the Secretary of State is able to exercise his powers of direction beyond dictating that the franchising director need not follow a tender process or set any limits on how the Secretary of State is to exercise the powers. We feel that the scope of his powers should be set out more clearly and so we iterate the various 763 combinations of directions which the Secretary of State may give. We also provided that in future there should be a formal statement of the procedures which are to be adopted dealing expressly with franchise replacement.
That will help those who may be considering entering into negotiations for franchise replacement to understand how the Secretary of State and the SRA will exercise their powers to award an early replacement franchise. It is a substantial advance on the general power currently in Section 26.
I want to make it clear that it is not the intention to use that power to impose a franchisee on an unwilling SRA. But there are circumstances where a direction in those terms would be an appropriate method of concluding franchise negotiations; for instance, if a franchise replacement is identified as the likely recipient of a franchise, the logical outcome of a Section 26 direction might be that the franchise should be awarded to that person. But we do not want to prevent a satisfactory outcome by limiting the way in which it can be brought about.
I hope that explains the rationale for the amendments to Sections 23 to 30 of the Railways Act in Clause 211, and I urge the noble Earl to withdraw his amendment.

§ 9.30 p.m.

§ Earl Attlee
My Lords, I thank the Minister for his reply which was as detailed as my speech in moving the amendment. I shall study the Minister's response very carefully. Sometimes when I study the noble Lord's replies I am persuaded by them, and for that reason I have not moved as many amendments at Report as in Committee. The noble Lord is very confident in his position and I do not believe that I shall be able to move him very far. Subject to the usual caveat, I beg leave to withdraw my amendment.

§ Amendment, by leave, withdrawn.

§ [Amendments Nos. 251 to 259 not moved.]

§ Clause 213 [Securing provision of substitute bus and taxi services]:

§ [Amendment No. 260 not moved.]

§ Clause 217 [Functions relating to Board's property]:

§ Lord Berkeley moved Amendment No. 261: Page 130, line 9, leave out subsection (4) and insert— ("(4) Any land required for the discharge of any of the functions of the Authority may be retained or disposed of at prices reflecting its transport use.").

§ The noble Lord said: My Lords, noble Lords will be aware that Amendment No. 261 is all about railway land in the ownership of Rail Property Limited which is transferred to the Strategic Rail Authority. I raised this matter in Committee and was interested in the reply of my noble friend Lord Macdonald. My noble friend confirmed that there was, no statutory impediment to the SRA retaining land that has a reasonably foreseeable railways use".—[Official Report, 17/7/00: col. 741.] 764 My honourable friend the Minister for Railways, Mr Keith Hill, suggested in the House of Commons that 20 years was a reasonably foreseeable timescale. I had the honour to become a member of the property advisory group of the SRA following Committee stage. That group also recommended to the SRA that 20 years was an appropriate timescale in which to look at the future need for land for the purpose of transport use. Considering that it takes at least 10 years to build a new railway—in the case of the Channel Tunnel Rail Link it will probably be 20 years—this is a reasonable timescale.

§ I was interested in my noble friend's statement that, Clause 217 enables the Secretary of State to give the SRA a direction about how land that could serve a transport use other than railways is to be disposed of or otherwise dealt with by the SAR". I am not clear whether that is a general or specific direction. Following the response of my noble friend Lord Whitty to a previous amendment, I am not sure whether that direction is to be made public. My concern is that a piece of land may be seen to be of use for, say, a station car park or rail freight terminal in five or 10 years' time. If a supermarket offers £5 million for the site, whereas it is quite clear that for transport use it is worth only £1 million, will the SRA regard £1 million as acceptable and allow the land to be sold to a transport operator for that sum? If so, does the SRA have to seek the approval of the Secretary of State or will it be allowed to take such action on its own?

§ Another possibility alluded to by my noble friend in Committee is that the SRA may have to sell it for £5 million and then make a grant of £4 million to bring down the value of the land to £1 million for transport use. It is all a bit messy. This probing amendment is one last attempt to clarify the position. I beg to move.

§ Lord Freeman
My Lords, I support the noble Lord's amendment. The crucial point here is that in order to make a judgment about whether a car park, old freight yard or maintenance depot will be of use to either a freight or passenger railway in future one must have a strategic plan. That is the only way in which one can judge whether the property is likely to be needed. I agree with what the noble Lord said about time frames. When one considers the planning for the Channel Tunnel rail link or even the upgrading of the West Coast main line, 20 years goes in a flash. Therefore, I strongly support the noble Lord. Noble Lords will be interested in the Minister's response about matching the requirement to judge the value of a piece of land against the plan of its possible need.

§ Lord Islwyn
My Lords, does the Minister appreciate that at present, there is a great deal of inconvenience to rail passengers, particularly over the safety factor? In recent years there have been considerable sales of railway land. We live in a horrendous time in terms of railway history. It has been suggested to me that consideration should be given to keeping relief land at the side of railway lines. 765 Relief lines could then be used to avoid inconvenience to the public. In terms of sale of land, that issue should be given serious consideration.

§ Baroness Thomas of Walliswood
My Lords, as other noble Lords have said, the amendment of the noble Lord, Lord Berkeley, is an acute probing amendment. I await with great interest the Minister's reply. This subject has been discussed in your Lordships' House with regard to a number of Bills. I became a Member of your Lordships' House six years ago and certainly since then we have discussed that question many times. No doubt it was discussed by other noble Lords long before l arrived. It is a matter of immense importance that we retain the land that is required for the Strategic Rail Authority's use.
Another important issue is the price at which that can be done. Public authorities—for example, local authorities—are obliged to seek the highest price for the land. That has sometimes hampered them in using the land for the best purpose in terms of the public service. It is important that we should try to avoid that pitfall and the kind of round-the-rabbit financial arrangements which might be used, as is suggested in the latter part of the speech of the noble Lord, Lord Berkeley. I await the Minister's response with great interest and hope.

§ Earl Attlee
My Lords, I listened carefully to what the noble Lord said in moving the amendment. I confess that I do not know how it works, but I have sympathy for the issue and agree that we need to have a long-term strategy. We must avoid short-term financial considerations.

§ Lord Macdonald of Tradeston
My Lords, the House will agree that this matter has already received a great deal of attention both here and in another place, and that we have made much progress. I know that my noble friend Lord Berkeley and noble Lords opposite have been heartened by the assurances that we have been able to give during the passage of the Bill. As my noble friend Lord Berkeley said, since the Committee stage, the shadow SRA has appointed the noble Lord to its property advisory group. My noble friend is advising the SRA on property. The SRA is advising me on policy. So I am in a rather contradictory position. I am never sure which of his many hats he is wearing at any given time. But I look forward to him giving me advice on how I should be answering him in the near future.
The amendment probes the extent to which the SRA will be free to dispose of land at its railway value, rather than at the higher value which might be obtained for non-railway use. We have already made it clear that there is no statutory impediment to the SRA retaining land that has a reasonably foreseeable railway use. As regards disposal, land decisions will be taken in the context of the SRA's emerging strategy. The SRA will consider carefully how best to use its financial powers and to manage its land holdings to meet its strategic objectives. It will consider on an individual basis cases in which there is a conflict between railway use and land value.
766 Where the SRA has taken the decision that a site is required for railway use, it will need to obtain the market value for that land reflecting the limitations on its use. Value-for-money considerations will apply as they do to any public body, but the SRA will have freedom within the agreed policy on land matters. It will not be a case of, say, a supermarket coming along and the SRA being obliged to accept a higher bid reflecting its value for retail development. The decision that the land is required for railway use will already have been taken after careful scrutiny.
Of course, railway users' bids will have to be realistic and reflect the full railway value. Safeguards will also be needed so that the SRA can be assured that a purchaser for railway use will not then maximise the value of the land in the interests of its shareholders. Our current advice—PPG 13—states that local planning authorities should identify and, where appropriate, protect transport sites.
More generally, support for rail freight will be channelled through a new, improved freight grants scheme. That provides a transparent way of using the SRA's broad financial powers under Clause 210.
On the question of whether the powers will be general or specific, they may be either. Clause 208(1) compels the publication of directions or guidance by the person giving the directions or guidance. Perhaps I may say to my noble friend Lord Isiwyn that the SRA will not own land of the kind to which he referred. It is really Railtrack which owns the adjacent land, and the regulator is considering licence changes relating to that Railtrack land.
With those reassurances, I hope that my noble friend will now withdraw his amendment.

Lord Berkeley
My Lords, I am grateful to my noble friend for his comprehensive and useful explanation of what is a complicated problem. He is absolutely right. Transport use is not always the perfect solution to everything. I know of one instance where a bus company wishes to buy some railway land. It wants to move its bus station to the new land so that it can sell off the existing bus station land for commercial development. That hardly meets the spirit of "transport use". I beg leave to withdraw the amendment.

§ Amendment, by leave, withdrawn.

§ Clause 222 [Regulator's power to require provision etc. of railway facilities]:

§ [Amendments Nos. 262 and 263 not moved.]

§ Earl Attlee moved Amendment No. 264: Page 134, line 45, at end insert ("if the Regulator is satisfied the person to whom the direction is given will not otherwise be adequately rewarded as set out in section 16E above').

§ The noble Earl said: My Lords, in moving this amendment, I should like to speak also to Amendments Nos. 265 and 288. I do not intend to move Amendment No. 289 because the Minister convinced me in Committee that the regulator has the matter in hand.

767

§ Subsection (2) of what will be new Section 16F of the 1993 Act enables the regulator to require the applicant for a direction to reward or make payments to the recipient of the direction. The amendment would limit such power to cases where the regulator is satisfied that the recipient will not otherwise be adequately rewarded as set out in the current provisions of new Section 16E.

§ The current drafting of new Section 16F(2) is: The Regulator may include supplementary provisions in any direction under section I 6A above, including (in particular)—

(a) provision adding detail (for instance, as to the time by which, or standard to which, the person to whom it is given is to do anything which it requires him to do); and
(b) provision imposing requirements on the applicant (for instance, to make arrangements for rewarding the person to whom the direction is given or to make payments to him)".

§ But there are no tests similar to those in Section 16E.

§ New Section 16B is extremely damaging to the working of Clause 222 and the new sections it adds to the 1993 Act. The person making the application may have to go to considerable lengths and expenditure, only for the application to be made commercially unviable when the regulator uses his unfettered powers under new Section 16F(2)(b). That uncertainly might deter an applicant from pursuing a project under the new section.

§ Under the amendment, the applicant would be able to anticipate the payments or rewards. The Minister may point to new Section 16A(3), which effectively allows the applicant to withdraw so that he will not burn his fingers beyond the cost of the feasibility study but nothing in the Bill counters the uncertainty of new Section 16F(2)(b), which creates the serious risk of an investment bottleneck.

§ Amendment No. 265 suggests that the Bill could be improved without Clause 222, which gives the regulator the power to impose an obligation on a private company to make an investment that, presumably, is not commercially viable. I say "presumably" because otherwise it would not be necessary to use the blunt and sometimes unpredictable instrument of legislation. The Government defend that provision on the ground that it may be in the public interest. Government interference on that scale in a private company is the worst of both worlds. The way to tackle investment in the public interest where there is no commercial benefit to Railtrack is to reform the incentives and subsidy system so that there are good commercial reasons for Railtrack to make the necessary investment.

§ The authority can in any case make grants if it so desires under Clause 210. It would still be possible for Railtrack to reject a project but it is hard to see why it would do so. In the event of a safety consideration, Railtrack would only need to put its hands up to the Health and Safety Executive and cry "Foul".

§ Apart from commercial unviability, I cannot imagine why Railtrack would not want to go ahead with a good project. The role of the Government and regulator is to set strategic objectives and implement 768 them via the authority through enforcement of licence conditions and adjustment of the subsidy and incentive system. Surely it is better to let Railtrack get on with it rather than indulge in intermittent management of the company.

§ Amendment No. 288 is designed to ensure that the regulator operates in a way necessary to encourage Railtrack to increase access to the rail network. I beg to move.

§ 9.45 p.m.

§ Lord Macdonald of Tradeston
My Lords, Amendment No. 264 would make any provision under new Section 16F subject to adequate reward. I understand the motivation but the amendment is unnecessary. New Section 16F specifies some of the matters that the regulator may include in an order under new Section 16A. We make it clear in new Section 16E that the regulator may only give a direction under new Section 16A if he is satisfied that the person directed will be adequately rewarded for improving the facility, which extends to any ancillary provision under new Section 16F.
As to Amendment No. 265, Clause 222 will enable the regulator to give the appropriate person a direction to provide a new railway facility or to give a railway facility owner a direction to improve or develop an existing facility. We recognise that is a powerful tool but in some cases it is justified. The industry is running a public service and there must be the power to force through vital improvements, to ensure that the infrastructure is adequate to meet the demands of a growing network and, above all, is safe. That power is not designed to replace normal commercial judgments, does not preclude voluntary arrangements and does not excuse facility owners from licence conditions and safety cases. It is an extra where really needed—and in all cases, the facility owner will be adequately rewarded. The authority will have to support an application. The final decision belongs to the rail regulator. He will be operating under his duties in Section 4 of the Railways Act 1993, including the duty to act in a way which he considers will not make it unduly difficult for holders of network licences to finance their activities.
The power is a long stop to be used where strategic issues are in question. I hope that your Lordships will agree that it is a necessary long stop and that Members opposite will feel able to withdraw their amendments.

§ Earl Attlee
My Lords, I am grateful to the Minister for that explanation. I shall read it most carefully in Hansard and meanwhile I beg leave to withdraw the amendment.

§ Amendment, by leave, withdrawn.

§ [Amendment No. 265 not moved.]

§ [Amendment No. 266 not moved.]

769

§ Clause 224 [Penalties]:

§ Lord McIntosh of Haringey moved Amendment No. 267: Page 137, line 43, at end insert— ("(2A) The amount of a penalty imposed on a relevant operator may riot exceed 10 per cent. of his turnover determined in accordance with an order made by the Secretary of State; and an order under this subsection shall not be made unless a draft of the statutory instrument containing it has been laid before and approved by a resolution of each House of Parliament.").

§ The noble Lord said: My Lords, government Amendments Nos. 267, 268, 270 to 276, 292 and 294 address the enforcement of railway operators' obligations under their licences or franchise agreement. Firstly, they provide an upper limit on penalties. Secondly, they provide a protection against the danger of penalties being imposed under both the Competition Act and the Railways Act in respect of the same event. Thirdly, they improve the provisions in the Bill, giving operators the right to appeal against the regulator's or the SRA's decisions on enforcement to the High Court.

§ Amendments Nos. 267, 268 and 276 meet our commitment in Committee to amend the Bill to introduce some of the protective provisions accepted during the passage of the Utilities Bill.

§ Amendments Nos. 267 and 276 impose an upper limit on any financial penalty or sum payable by an operator for breaching an enforcement order. The upper limit is 10 per cent of the turnover of the relevant operator, with detailed provisions set out in an order made by the Secretary of State.

§ Amendment No. 267 imposes a duty on the Secretary of State to make detailed provisions in relation to the definition of turnover, by order made by affirmative resolution.

§ Amendment No. 294 will preserve the current position for the time that it will take to get the turnover regulations prepared and approved by Parliament.

§ Amendment No. 268 provides the same degree of protection against what has been called "double jeopardy" with regard to financial penalties as for other aspects of enforcement action. It does this by requiring that the rail regulator should not impose a penalty where he is satisfied that the most appropriate way of proceeding is under his Competition Act powers. It also requires the SRA, before imposing a financial penalty relating to the contravention of a consumer protection provision in a licence, to ensure that the regulator does not propose to take simultaneous action under the Competition Act.

§ Amendments Nos. 270 to 275 and 292 improve the drafting of the provisions in the Bill which specify the remedies available to a court where it upholds an operator's appeal.

§ I shall not now speak to the Opposition's amendments in the group but shall listen carefully to what noble Lords have to say. I beg to move.

§ Earl Attlee
My Lords, my Amendment No. 269 is in this group. It is self-explanatory and is designed to improve the new provisions relating to the imposition 770 of fines, corrections or penalties. As I said in Committee, we accept that as a last resort there needs to be a penalty regime to deal with breaches of obligations. However, these powers are wide-ranging and it is in the interests of both the railway operators and the railway customers that policy and enforcement are clear and issued in advance.
In Committee, the Minister objected on the ground that the provision would bite only on Railtrack, which does not run trains. In a way, the Minister was right; it was a Railtrack-type amendment. However, it was not designed to be anti-Railtrack. The prime target is the current problem of the lack of incentive—indeed, disincentive—for Railtrack to allow more trains on the track because of the increased need it creates for rail repairs and the delays which they may cause. This is at a time when the number of passengers is growing. To an extent, the industry is a victim of its own success. We have no objection to adding other operators and honing the wording, but the Minister also claimed that the regulator and the SRA would deal with the problem through positive incentives. Fine, but that is jam tomorrow, and anyway sticks are useful and are sometimes a necessary complement to carrots.
The safety concerns highlighted by the Hatfield crash have also made the issue more pressing. The penalty system must be structured so that it does not create or exacerbate a conflict between safety and service. Railtrack must not feel that it is being unfairly penalised for carrying out the extra safety work made necessary by additional use of the track.

Lord Berkeley
My Lords, I was not going to intervene, but I must point out to the noble Earl, Lord Attlee, that there is considerable debate about whether the accident at Hatfield was caused by excessive use of the track or inadequate maintenance. It would be rash to legislate for more or different penalties so soon after an accident the causes of which have not yet been identified. I have some concerns about the noble Earl's amendment.

§ Lord McIntosh of Haringey
My Lords, I agree with the noble Lord, Lord Berkeley. After Hatfield, the public wants to be satisfied that the rail industry is working together and doing everything possible to address the safety issues. We must not prejudge the results of the Health and Safety Executive's investigation into the causes of the accident or the recommendations arising from the Cullen inquiry into the culture, management and regulation of safety.
The noble Earl, Lord Attlee, spoke only to Amendment No. 269, which would affect the statement of policy made by the rail regulator and the SRA towards penalties. The amendment's general aims are perfectly good to provide financial incentives to run more trains, to provide a fair division of responsibility for train delays, to prevent disproportionate penalties and to protect the franchise parameters.
771 The provision of incentives is not the primary responsibility of a penalty regime. The issue is better tackled through contractual and regulatory arrangements, such as franchises and access agreements. The point about proportional penalties is unnecessary as penalties may not be unreasonable. One that was disproportionate or affected the basis of a franchise contract would not be reasonable.
Penalties do not come at the end of the incentive regime. They are imposed when the operator or facility owner has already failed to meet their contractual or licence obligations. The prospect of penalties can be an effective stick and an incentive to ensure that trains are run to a contractual level, but once a standard has been contravened, a penalty is not connected with a specific level of future performance. For performance to be driven up, it needs to be worth while to invest for the long term and to maintain an improved service in the short term. That is why the SRA will negotiate replacement long-term franchises to give operators a greater stake. As part of those franchise incentive payments, rewards and penalties—carrots and sticks—will double.
Railtrack also needs an inducement to invest. One of the purposes of the rail regulator's periodic review of access charges is to ensure that Railtrack shares in growth and is therefore willing to contribute.
The noble Earl's aims are being met, but in the positive, not the negative sense. I hope that he will not press Amendment No. 269.

§ On Question, amendment agreed to.

§ Lord McIntosh of Haringey moved Amendment No. 268: Page 138, line 4, at end insert— ("( ) The Authority shall not impose a penalty on a licence holder or person under closure restrictions unless—

(a) it has given notice to the Regulator specifying a period within which he may give notice to it if he considers that the most appropriate way of proceeding is under the Competition Act 1998;
(b) that period has expired; and
(c) the Regulator has not given notice to the Authority within that period that he so considers (or, if he has, he has withdrawn it).

( ) The Regulator shall not impose a penalty if he is satisfied that the most appropriate way of proceeding is under the Competition Act 1998.").

§ On Question, amendment agreed to.

§ Earl Attlee moved Amendment No. 269: Page 138, line 22, at end insert ("; and (d) the desirability of providing a financial incentive for relevant operators to run or allow the running of more trains and for a fair division of responsibility for train delays, but no policies will be adopted that will have the effect of imposing disproportionate penalties or materially altering the parameters within which an existing franchise was granted").

§ The noble Earl said: My Lords, I wish to test the opinion of the House.

772

§ 10 p.m.

§ On Question, Whether the said amendment (No. 269) shall be agreed to?

§ Their Lordships divided: Contents, 21; Not-Contents, 49.

Division No. 2
CONTENTS
Attlee, E.	Geddes, L.
Blatch, B.	Hanham, B.[Teller]
Brabazon of Tara, L.	Henley, L.[Teller]
Brougham and Vaux, L.	Hodgson of Astley Abbotts, L
Byford, B.	Luke, L.
	Lyell, L.
Chalker of Wallasey, B.	Mackay of Ardbrecknish, L.
Cope of Berkeley, L.	Northbrook, L.
Craigavon, V.	Northesk, E.
Dixon-Smith, L.	Rotherwick, L.
Freeman, L.	Vivian, L.
NOT-CONTENTS
Acton, L.	Hamwee, B.
Addington, L.	Hardy of Wath, L.
Amos, B.	Hilton of Eggardon, B.
Archer of Sandwell, L.	Hollis of Heigham, B.
Bach, L.	Hughes of Woodside, L.
Berkeley, L.	Hunt of Chesterton, L.
Blackstone, B.	Hunt of Kings Heath, L.
Brennan, L	Macdonald of Tradeston, L.
Brett, L.	McIntosh of Haringey, L. [Teller]
Burlison, L.
Carter, L.[Teller]	McIntosh of Hudnall, B.
Cohen of Pimlico, B.	MacKenzie of Culkein, L.
Davies of Coity, L.	Ramsay of Cartvale, B.
Davies of Oldham, L.	Sainsbury of Turville, L.
Desai, L.	Sawyer, L.
Dubs, L.	Scott of Needham Market, B.
Eatwell, L.	Sewel, L.
Farrington of Ribbleton, B.	Simon, V.
Faulkner of Worcester, L.	Stone of Blackheath, L.
Filkin, L.	Symons of Vernham Dean, B.
Gibson of Market Rasen, B.	Thomas of Walliswood, B.
Gilbert, L.	Wallace of Saltaire, L.
Goldsmith, L.	Warwick of Undercliffe, B.
Goudie, B.	Whitty, L.
Gould of Potternewton, B.	Young of Old Scone, B.

§ Resolved in the negative, and amendment disagreed to accordingly.

§ 10.10 p.m.

§ Lord McIntosh of Haringey moved Amendments Nos. 270 to 276: Page 141, line 41, leave out from ("On") to ("a") in line 45 and insert ("an application under this section on the ground mentioned in subsection (1)(a) or (b) above the court, if satisfied that the ground is established, may quash the penalty or (instead of quashing it) make provision under either or both of paragraphs (a) and (b) of subsection (4A) below. (4A) The provision referred to in subsection (4) above is— (a) provision substituting"). Page 141, line 47, leave out ("or (c) may specify") and insert ("and (b) provision substituting"). 773 Page 142, line 5, leave out from beginning to ("may") in line 6 and insert— ("( ) On an application under this section on the ground mentioned in subsection (1)(c) above the court, if satisfied that the ground is established,"). Page 142, line 11, leave out ("a") and insert ("the"). Page 142, line 22, after first ("the") insert ("relevant"). Page 142, line 25, leave out ("and at such time and place,") and insert ("at such place and by such date"). Page 142, line 26, at end insert— ("(7B) The amount of the sum may not exceed 10 per cent. of the turnover of the relevant operator determined in accordance with an order made by the Secretary of State; and an order under this subsection shall not be made unless a draft of the statutory instrument containing it has been laid before and approved by a resolution of each House of Parliament. (7C) If the whole or any part of the sum is not paid by the date by which it is to be paid, the unpaid balance from time to time shall carry interest at the rate for the time being specified in section 17 of the Judgments Act 1838.").

§ On Question, amendments agreed to.

§ Clause 227 [Extension of functions]:

§ [Amendments Nos. 277 to 279 not moved.]

§ [Amendment No. 280 not moved.]

§ Lord Macdonald of Tradeston moved Amendment No. 281: After Clause 233, insert the following new clause—

cc773-80

PUBLICATION OF PROPOSED CLOSURES AT STATIONS 172 words

cc773-80

Publication of consent at stations 3,044 words