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Mr. Howarth: Is my hon. Friend aware that an annual review based on the RPI, rather than RPI minus X, is the formula used for the Dartford and Severn crossings? Does he think that if it is appropriate in those cases, it is appropriate on Merseyside?

Mr. Chapman: No, I do not. We are not discussing the Dartford or any other crossing: we are discussing the Mersey tunnels, which are a sort of artery that is peculiar to Merseyside. They are the busiest route in our anthill. They are an essential artery for the economy. The other crossings are national issues, but the Mersey tunnels are different.

John McDonnell (Hayes and Harlington): Surely the point is that we are discussing the Mersey tunnels, not national tolling, so the issue is irrelevant. My hon. Friend said that he saw no cause to increase tolls. What would be a reason for an increase in tolls?

Mr. Chapman: If there was an effective means of controlling traffic flows through the tunnel, it might be

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one reason. Another reason might be a demonstrated shortage of funds in Merseytravel. Tunnel users have no choice but to go through them, be it to the night shift at Jaguar or to hospitals or other jobs.

Stephen Hesford: To the theatre.

Mr. Chapman: Theatre-goers have a degree of choice.

For the most part, people go through the tunnels because they have to; they have no choice in the matter. On Second Reading, one hon. Member said that he went through the tunnels regularly, just for the pleasure of it. By and large, people do not do that; they make the journey out of necessity.

Mr. Howarth: My hon. Friend is overegging the pudding somewhat. I used to teach at Birkenhead tech, in the constituency of my right hon. Friend the Member for Birkenhead (Mr. Field). I travelled every day, from Huyton to Birkenhead, on public transport—by train first, then on the underground loop. That is perfectly possible, and people do have choice. My hon. Friend should not be so misleading as to suggest that they do not have alternatives.

Mr. Chapman: My hon. Friend will forgive me if I say that, young though he looks, it is a year or two since he worked at Birkenhead tech. I think that that was before the deregulation of bus services, although I may be wrong about that.

Mr. Howarth: I do not know whether I explain myself badly, or whether my hon. Friend does not listen, but I travelled by train and on the underground loop from Liverpool city centre, and neither option has been affected in the slightest by bus deregulation.

Mr. Chapman: I did not misunderstand the point at all. My point is that tunnel users have no choice. Bus services have deteriorated since my hon. Friend used to travel to Birkenhead, whether he used them or not. If my postbag is to be believed, the train services are pretty chronic—

Mr. Deputy Speaker (Sir Michael Lord): Order. This is a very interesting discussion of the various modes of transport throughout Liverpool and the Wirral, but the hon. Gentleman should return to the fairly precise amendment to which he is speaking.

Mr. Chapman: Thank you, Mr. Deputy Speaker.

John McDonnell: My hon. Friend has said that an increase in price could be used to influence the flow of traffic through the tunnel. Does he agree with those who argue that alternative forms of transport exist and that increasing the charges in the proposed way is a form of congestion charging? Will that be part of the policy inflicted on the public as a result of the Bill?

Mr. Chapman rose—

Mr. Deputy Speaker: Order. The hon. Member for Wirral, South (Mr. Chapman) must not get sidetracked

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by interventions such as that. He was speaking very specifically to a group of amendments. He ought to do that now.

John McDonnell: On a point of order, Mr. Deputy Speaker. Obviously, I did not want to lead my hon. Friend astray. My question arose out of his speech.

Mr. Deputy Speaker: That is not a point of order for the Chair. We ought to get on with the debate.

Mr. Chapman: At present, Merseytravel must justify increases in tolls. That should not change. Indeed, I think that Merseytravel should also be made to justify properly its spending on other projects, especially when using money from the tunnels. The formula RPI minus X provides an accountable system for that. It brings efficiencies and cost-effectiveness, and prevents wild increases in tolls.

Across the utilities, the present statutory framework does not prescribe what form price regulation should take, but in practice the regulators have chosen to use RPI minus X. Price caps are set by the regulator for the period of a price review, which is typically five years, on the basis of detailed forecasts of costs and revenues provided by the regulated organisation. I see considerable merit in that, and there is no reason why it should not be applied to Merseyside passenger transport authority.

In the immediate post-privatisation period, there were concerns over the level of profits made by some of the privatised companies, in spite of the price caps put in place on flotation. That is why the Government levied a windfall tax immediately on coming into power. That dealt with excess profits following the original privatisation. Subsequently, the mechanism has been tightened and there are more effective controls. They give the right incentives to deliver efficiencies and should continue to bear down on prices. If the system is good enough for the majority of our utilities, why cannot it be applied to the tunnels? As I hope I have demonstrated, that regulatory system is effective and flexible and, in most instances, has been used successfully.

5.45 pm

Mrs. Curtis-Thomas: I thank my hon. Friend for giving way so generously. Will he confirm that his definition of efficiencies in the MPTA means job losses, and, if so, how many such losses would he expect to occur before he is satisfied with the situation?

Mr. Chapman: No, efficiency does not mean job losses; it means effective operation. I do not have a dictionary with me, but the word certainly does not mean job losses; it means doing things in the best possible way.

Judy Mallaber (Amber Valley): What proportion of the costs would be for staffing? If operating efficiency did not come from staffing cuts, where does my hon. Friend imagine it would come from?

Mr. Chapman: It is not for me to run the Mersey tunnels or the MPTA; it is for the chairman, the executive and the authority to decide on those things.

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RPI minus X was applied effectively to utilities, so why are people saying that it would mean job losses if it was applied to the Mersey tunnels? That does not make sense.

Stephen Hesford: Perhaps I can help my hon. Friend. Unfortunately, new schedule 1, which I proposed, was not selected, but it included a short definition of "efficient manner" that my hon. Friend might agree was suitable. It stated that there should be value for money and that the management costs should not exceed—

Mr. Deputy Speaker: Order. The reason why amendments are not selected is well known to the hon. Gentleman. We cannot start to discuss amendments that have not been selected.

Mr. Chapman: Whatever the definition of efficiency, in the absence of a regulator, the RPI minus X system would provide a check on the MPTA in the form of the Secretary of State. Indeed, I understand that the system would allow the Secretary of State to reduce tolls, if he saw fit, simply by raising X to a value higher than that of RPI.

We need to establish a clear, long-term principle for price regulation that will ensure that consumers receive a fair deal, and that the legitimacy and stability of the regulatory system for the tunnels is maintained. We need to ensure that RPI minus X delivers that.

The system provides incentives to efficiency in the absence of a regulator, relying on price regulation administered by the Secretary of State. That background both informs the case of the MPTA and carries it forward. It shows us the application of RPI minus X and the importance of transparency, which is sometimes difficult in such circumstances, in the mechanisms that would help to spread best practice and cost-effectiveness through accountability.

The primary aim of price regulation is to protect consumers. One approach would be to rely exclusively on RPI minus X. An alternative would be to make greater use of error correction mechanisms as a supplement to RPI minus X, thereby providing a clear, built-in means of sharing the benefits when they differ from those envisaged when the price cap was set.

Price regulation is designed to control abuse by a monopoly. The aim is to ensure that prices are no higher than those that would be charged by an efficient organisation in a competitive market.

John McDonnell: Will my hon. Friend clarify what he defines as a competitive market in this field?

Mr. Chapman: In this field, there is no competitive market, so there must be a mechanism to arrive at one. That is what RPI minus X does.

The basic system that I have set out will, I hope, institute accountability and regulation as a means to achieve efficiency and cost-effectiveness—strands that are currently lacking throughout the authority and that will not result from the Bill. That is why I am proposing this important amendment.

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