HL Deb 07 March 2001 vol 623 cc295-302

8.37 p.m.

The Minister of State, Department of the Environment, Transport and the Regions (Lord Macdonald of Tradeston) rose to move, That the draft order laid before the House on 1st February be approved [7th Report from the Joint Committee].

The noble Lord said: My Lords, the House is asked to consider this draft order, which is subject to the affirmative resolution procedure. The purpose of the order is to give the Scottish Executive the power to provide grants to the Strategic Rail Authority in respect of passenger rail services provided under Scottish franchises.

Under the arrangements for the devolution of functions to the Scottish Parliament, railways are a reserved matter to the Westminster Parliament. However, the Government made a number of commitments during the passage of the Scotland Bill to ensure that Scottish Ministers would have an appropriate level of control over Scottish passenger rail services within the overall Great Britain framework—a set of commitments known as the "McLeish Settlement". The Government have been working progressively towards implementing measures to meet those commitments and the order we are considering today represents the virtual completion of this process.

The order is made under Section 63 of the Scotland Act. Section 63 provides that an Order in Council may be made for, among other things, any function of a UK Minister of the Crown, so far as it is exercisable in or as regards Scotland, to be exercisable by Scottish Ministers instead of, or concurrently with, the UK Minister.

The order makes provision for Scottish Ministers to exercise the powers given to the Secretary of State under paragraph 7 of Schedule 14 to the Transport Act 2000. That paragraph provides that the Secretary of State, may make to the [Strategic Rail] Authority grants of such amounts, on such terms, as he may determine".

The order lists the functions that can be exercised by the Scottish Ministers. These are the making of grants for funding passenger rail services which, first, start and end in Scotland and are provided under a franchise agreement; and, secondly, which either start or end in Scotland and are provided under a franchise agreement by someone who also holds a franchise in the first category. In practice, this means the services currently provided under the ScotRail franchise, including the Scottish sleeper services and the small number of cross-border services operated by ScotRail. Apart from the cross-border services, these are the same services for which the Scottish Ministers can give directions and guidance to the SRA under Section 208 of the Transport Act.

The Scottish Ministers will also become responsible for funding services under this franchise should it ever become necessary for the SRA to exercise its duty under Section 30 of the Railways Act 1993 as the operator of last resort. The Scottish Executive currently funds the Strathclyde Passenger Transport Authority elements of the ScotRail franchise. It will now become responsible for funding the entire franchise.

The Department of the Environment, Transport and the Regions will transfer funds to the Executive to enable it to provide grants to the SRA to meet the funding requirements under the ScotRail franchise in the financial year 2001–02 and the following two years. Contractual franchise payments for 2001–02 are estimated to amount to £111 million. Funding for the Executive will be adjusted if necessary to reflect performance payments or receipts and the rail regulator's periodic review of Railtrack's access charges.

Until the end of the current Scottish franchise, there will be a similar transfer to the Scottish Executive from the DETR's current Spending Review 2000 provision to cover the fixed franchise payments. From 2004–05 onwards, however, it will be for the Scottish Executive to include provision for the Scottish rail franchise in its own future spending plans.

The Scottish Ministers' powers under the order will be exercisable concurrently with those of the Secretary of State. We are committed to giving the Scottish Executive financial responsibility for the Scottish franchise from 1st April this year. But the Secretary of State needs to retain the ability to make grants to the SRA in respect of the Scottish franchise, so that Scotland can benefit from GB-wide initiatives such as the rail passenger partnership scheme. For example, any payments to the Scottish franchise operator under the rail passenger partnership may be incorporated in the relevant franchise agreement, and such payments by the SRA would be funded by the Secretary of State rather than by the Scottish Executive.

The Secretary of State's retention of this power will not affect the Scottish Ministers' independent exercise of the power, or their role in issuing directions and guidance to the SRA in respect of the Scottish franchise and advice in relation to other operators' services that serve Scotland.

In exercising, or declining to exercise, its powers under the Transport Act, the SRA is required to comply with directions and guidance issued by the Secretary of State, including the financial framework that he has set for the authority. The overall Great Britain framework will thus be preserved. The powers of the Scottish Ministers to give directions and guidance remain those under the Transport Act.

The power to make direct grants to the SRA in respect of the Scottish franchise will enable the Scottish Executive to target funds effectively and give a financial lever over the strategic development of rail services in Scotland. This order demonstrates the Government's commitment to delivering the appropriate oversight of Scottish passenger services to the Scottish Executive within the overall GB policy framework for the railways. I commend the draft order to the House. I beg to move.

Moved, That the draft order laid before the House on 1st February be approved [7th Report from the Joint Committee].—(Lord Macdonald of Tradeston.)

Baroness Seccombe

My Lords, I thank the Minister for outlining the purpose of the order, which appears to make good sense. We have studied the order carefully and note that it is as the result of a commitment made during the passage of the Scotland Bill. We therefore have no objections to the passing of this order.

The Earl of Mar and Kellie

My Lords, I, too, am grateful to the noble Lord for explaining the purpose and effect of this Scottish devolution order. It interests me for two reasons: my almost hereditary interest in Scottish autonomy and my lifelong interest in railway operations, which will colour somewhat my response to the order.

I should like to compliment, once again, the helpful executive briefing note attached to the order and sent down by the Scottish Executive.

This is a Scotland Act Type A order requiring scrutiny by both Houses. Section 63(1)(b) of the Scotland Act allows the Scottish Ministers to share responsibility for, in this case, making grants to the holder of the ScotRail franchise, who may not always be National Express.

The order refers to working concurrently. This seems to mean that, while the Secretary of State at the DETR will retain powers to make grants, for the Scottish passenger rail franchise, he will not be using them—a self-denying ordinance on most occasions—but I suspect that that is in line with the theory of devolution.

What is more interesting and worrying is the matter of the funds behind this order. While speaking to the 3rd Standing Committee on Delegated Legislation in another place, the Parliamentary Under-Secretary of State, Mr Keith Hill, explained that the DETR transfers £111 million per year to the Scottish consolidated fund so that the Scottish Ministers can send it on to the Strategic Rail Authority, which will ultimately pay the £111 million as a grant to the ScotRail franchise holder.

This long-winded funding trail will last until 2004. At this point it seems that the DETR will cease to send funds to the Scottish consolidated fund and the Scottish Executive will have to find the ScotRail franchise funds from within the Scottish block grant. Will the Scottish block grant be adjusted specifically to take this into account after 2004?

The order will give the Scottish Ministers a greater chance to influence the development of rail services in Scotland. That is, of course, somewhat barbed by the need to back that influence with funding—but then, there is more to passenger rail services than franchise funding.

The other partner in this is, of course, the public, who must adopt the new services and make them self-sustaining. It is one thing to introduce a new passenger rail service on an existing operational railway line—a year or so ago, ScotRail trialled a commuter service from Dingwall to Inverness on a "use it or lose it" basis; that is the easy example—but more problematic is the creation of a passenger service on a railway which is mothballed, dismantled or in need of creation anew.

The Minister will not be surprised that the example offered here is the Alloa to Stirling passenger project. In this example the service cannot be offered on a simple "use it or lose it" trial basis; the railway has first to be restored. I acknowledge that there is a concurrent project to repair the railway from Stirling through Alloa and on to Kincardine for freight purposes, mainly the delivery of coal to Longannet power station. I declare an interest: this potential freight line goes past my home.

I wish to make two points on this issue. My first point concerns capital grants for the restoration of the railway infrastructure. Although an impressive list of contributors is assembled, too much is expected of the Clackmannanshire council—£3.5 million, I believe. I wish to make the point that the re-establishment of this rail link will have as many national benefits as local ones.

My second point concerns car parking at the proposed Alloa station. As car drivers often need to be extracted from their cars with the proverbial can opener, it will be vital that there is more than adequate car parking. Regrettably, car drivers need little excuse not to use public transport. Mild anxiety about not finding a car park space is all that many will need.

This order fulfils an earlier commitment and, in effect, devolves greater powers to the Scottish Parliament. I am always in favour of such a devolutionary trend, especially if there are funds attached to it. I welcome the order and look forward to the introduction of a further order, which, I believe, will transfer legislative competence for powers to promote and construct new railways in Scotland, devolving it to the Scottish Parliament.

I note that the order applies only to passenger services out with the Strathclyde Passenger Transport Executive area. Finally, I observe that the provision of grants for rail freight facilities is already devolved to the Scottish Parliament within Section 249 of the Transport Act 2000. I presume that that will not require any secondary legislation.

Baroness Carnegy of Lour

My Lords, the question I had in mind to ask the Minister was a very simple one; namely, what does the order mean when it says that Scottish Ministers and a Minister of the Crown will act concurrently? I then heard the Minister's explanation which was of enormous complexity. Indeed, it was quite difficult to follow precisely what will happen. I am sure that we trust the Minister in that he has a full-proof scheme. But, following from the noble Earl's questions, I understood the Minister to say that the department would decide the amount that would be given to the franchise holder until the year 2004, and that that money would be passed to the Scottish Executive which would, in turn, pass it on. After 2004, I presume that it will be for the Scottish Executive to decide the amounts that might be given in grant.

Can the Minister say how the funding of the Scots Parliament will actually be arranged in that case? Will an earmarked amount be provided by the department? Alternatively, will the government of the day make a sort of "stab" at the amount that the Scottish Executive might want? It seems a rather peculiar arrangement to me, because grants to railway companies are not quite like the other services that the Scottish Executive has to fund. Can the Minister give us an idea—I believe that this is what the noble Earl was asking—of how the funding will be decided? That is an important matter.

Lord Macdonald of Tradeston

My Lords, the noble Earl, Lord Mar and Kellie, demonstrated, as ever, a very impressive grasp of the background both of the legislation and of rail matters. As regards some of the noble Earl's more detailed questions about the nature of rail services in Alloa—I am aware of his commitment to Clackmannanshire— I am sure that he would not expect me to deal with the details involved.

However, through the rail passenger partnership scheme, which is one of the areas where we shall continue to work through our concurrency with rail services in Scotland, a pre-qualification bid has been received from Clackmannanshire council and is currently being evaluated. As the noble Earl will know, the proposal is to build a new station at Alloa and to introduce an hourly Alloa to Glasgow rail service. That is an example of the rail passenger partnership scheme offering the prospect of help inside Scotland, in addition to the services provided by ScotRail under contract.

Looking at the way that these payments are committed, I should emphasise to the noble Baroness, Lady Carnegy, that the franchise payments made before 2004 are contractually committed. Subsequent to 2004, the funding of the replacement Scottish franchise will be met by Scottish Ministers out of the Scottish-assigned budget; in other words, out of the block grant that is negotiated for Scotland.

I turn to the question of concurrency that the noble Baroness posed. It is important for us to be able to invest in Scotland in parallel with the other commitments that we have through franchise. Incidentally, I should just clarify that, although money goes from the Government, it does not go to the franchise owner in the first instance, as has been suggested; it goes to the Strategic Rail Authority and is then passed on to the franchise owner—in this case, ScotRail. As I said, after the year 2004, it will be paid for through the block grant.

Again, as I am sure the noble Earl is aware, we have been making it clear that the DETR will remain responsible for paying the grant to the SRA, in order to fund railway improvements in Scotland. Through the rail passenger partnership scheme that I mentioned, we shall also be able to improve the railway services in Scotland; we shall also be able to do so through the SRA contracting directly with Railtrack for enhancements to the network, if that is required. The Scottish Executive will continue to be able to fund rail projects directly, rather than via the SRA through its existing powers. For example, such payments can be made from the Scottish Executive's public transport fund. Much more money has been made available in the context of the Spending Review 2000 for transport matters, and that increases the chance that I mentioned of 20 per cent per year for transport matters. Although the authority over the spending of that money is delegated to Scotland, it will also be available for the improvement of transport.

As far as concerns freight grants, there is no need for more orders because all of those powers are already devolved to Scotland. I hope that my answers do not add to the complexity mentioned by the noble Baroness, and that the order will commend itself to the House.

The Duke of Montrose

My Lords, before the Minister sits down, perhaps he could confirm whether I understood the situation correctly. After the year 2004, it sounded to me as though it will be up to the Scottish Executive to lobby for the necessary increase in grant that will be needed to cover the investment that has previously been made directly. Am I correct in my understanding?

Lord Macdonald of Tradeston

No, my Lords. Subject to Parliament voting the main Supply Estimates for the year 2001–02, the Scottish Executive would receive transfers arranged by the DETR of £.111 million for 2001–02, as I mentioned, 108 million for 2002–03 and £107 million for 2003–04. Those are the amounts required on current estimates to fund the fixed payments under the existing ScotRail franchise. However, there may be some extra public expenditure until 2004, which would be affected by, for example, the decisions made by the rail regulator on track access charging and how that applied in Scotland. Subsequently, from 2004–05 and onwards there will be a new spending review period.

From 1st April 2004, it will be for the Scottish Executive to include provision for the Scottish rail franchise in its own spending plans. But those would be funded out of the Scottish Executive's block grant, so the lobbying, if you like, would be part of the much larger negotiation about Scotland's share inside that spending review period.

The order we are debating today allows the Scottish Ministers to make grants to the SRA for the purposes specified in the schedule to the order. The levels of funding to be provided will be determined by the public expenditure mechanisms, some of which I have outlined. However, as I say, the more general mechanism comes into play in 2004.

On Question, Motion agreed to.