|
Mr. McNulty: I know that I forget things myself, but it is a tad discourteous to forget the names of hon. Members' constituencies. My hon. Friend the Member for Knowsley, North and Sefton, East made a fair point. [Interruption.] Yes, I do have the list of Committee members to remind me of his
Column Number: 086
constituency. It confuses me somewhat in that the hon. Member for Cities of London and Westminster (Mr. Field) is the MP for where we sit. I sometimes feel that I should write him a letter to seek permission to come to his constituency every time I come to work, but happily we do not have to do that.
I am grateful to my hon. Friend the Member for Knowsley, North and Sefton, East for raising the issue, and he makes an entirely fair point, but I shall deal momentarily with the point made by the hon. Member for Cities of London and Westminster. Given that the Secretary of State now has clear powers in relation to a range of rail services—principally, but not exclusively, the national network, which is not party to specific areas—and given that we cover Wales, Scotland and the passenger transport executives, I fail to see what an English rail authority would do that is not covered by those elements. Perhaps the hon. Gentleman will elaborate on his ideas, but his proposal is a tad confusing.
I am grateful to my hon. Friend for explaining what the amendment addresses—namely, that the ORR should have regard to funds available to passenger transport executives for rail in exercising its functions under the 1993 Act and the Bill. It is important that the ORR should have regard to the interests of other public sector bodies that fund the railways.
I absolutely endorse, as I have done previously, my hon. Friend's comments about Dowd and Scales's regime—I was looking for a nice word—at Merseytravel. They have been extremely innovative and what they have done is, in some degree, a template for what other passenger transport executives might do within the curtilage of existing laws, let alone future laws. Although Neil Scales looks nothing John F. Kennedy, in a Kennedyesque fashion, they start from the premise of how they can break through impediments to securing achievements in the interests of public transport in Merseyside. That approach is different from the one that I fear is the starting point in some passenger transport executives, which ask, ''What are the barriers and how can we whinge and moan about them?'' That is not talking out of turn and I shall say that to the chief executives of the passenger transport executives. They know that that is my view.
None the less, the amendment is—I have not used this word yet, so I shall use it now—otiose, in that what it seeks is already in the Bill. Subsection (9) introduces a new duty on the ORR to have regard to securing value for money for those who make public funds available when it exercises its functions. Funds provided by passenger transport executives are also mentioned in the proposed new section 4(5D)(b) of the 1993 Act. I am in correspondence with Mr. Scales about that. That provision does what the amendment would do, so the amendment is otiose.
There would be other dangers in accepting the amendment. Its meaning and the meaning of what is already in the Bill might seem the same, but the different wording is important. Local authority budgets are not ring-fenced, so authorities have the flexibility to focus funds where they can be best utilised, taking into account local circumstances. The reference to ''funds available'' in the amendment could
Column Number: 087
therefore be interpreted as referring to all the funding that a PTE receives, as all of it could be used for rail. I imagine that that is not my hon. Friend's intention because the PTE's duties go far beyond simply rail services. The Bill refers to funds that are or are likely to become available, meaning that the ORR will consider only the funding that the PTEs are likely to expend on railway services and the PTE funding of which it has been notified.
The amendment should be gently rejected on two fronts. First, because its intentions are dealt with in another part of the Bill. Secondly, because if we were to accept it, it would not meet the aims for which I am sure that it was intended. I shall meet the beloved Mr. Scales tomorrow, along with other chief executives, and shall put the point as forcefully to him. I have no doubt whatsoever that he will be just as forceful in his retort. In those circumstances, I ask my hon. Friend to withdraw the amendment.
Mr. Howarth: I am grateful to my hon. Friend the Member for Harrow, East (Mr. McNulty). I take no offence from the failure of the hon. Member for Cities of London and Westminster to identify my constituency correctly; I am sure that his heart was there, even if his head was not.
Before I conclude, I should say that I am heartened by the observations made by the Minister. For the benefit of the Committee, a little explanation about his relationship with Merseyside might be helpful. Apart from being a student there, during which time he assures me that he frequented certain disreputable premises in and around the city—we will not go any further than that—
The Chairman: Did he travel by train? That is the question.
Mr. Howarth: The particular premises that I have in mind mean that had he gone there by train, it probably would not have been on any tracks.
My hon. Friend has a close relationship with Merseyside that goes beyond that. Just as he holds Merseytravel in high regard, it holds him in high regard. I should add, briefly because it is slightly beside the point, that he is a great hero of the taxi drivers in Liverpool. When there was an attempt to deregulate them some 18 months or so ago, there was a write-in campaign to my hon. Friend from the taxi drivers and every single one of those letters started, ''Dear Tommy''. From thereon in, he will always be known on Merseyside as Tommy. However, in view of the warm remarks that he has just made, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Wilshire: On a point of order, Mr. Griffiths. Would it be in order for any Member who wants to give the Committee a tour of his constituency to bring a map, so that we could all have a copy and know where they are talking about? It is a far-off place, up there.
The Chairman: Everyone will have heard that.
Column Number: 088
Question proposed, That the clause stand part of the Bill.
Mr. Knight: I am pleased that, in Liverpool at any rate, the Minister is more popular than my hon. Friend the Member for Henley (Mr. Johnson).
In this age of freedom of information and the public's right to know, which we support, if the Bill becomes law we will face a position in which Scottish Ministers and Members of the Welsh Assembly debate, publish and consult on a strategy for railways without the guarantee that the public will be engaged to the same extent by the Secretary of State on the railway strategy and policy in England. What assurances can the Minister give us that he will enter into the spirit of ensuring the dissemination of knowledge on the Government's strategy for England? Will we, for example, have an annual debate on railways in Government time in the House?
10 am
Mr. McNulty: As I have said in our deliberations on these and previous amendments, we fully intend to carry on issuing documents, including our departmental annual report and, I would guess, updates on our rail strategy, following both the rail and transport reviews. That will continue. Sadly or otherwise, it is not in my gift to offer an annual debate on rail in Government time, but for however long I am the Minister with responsibility for railways, I shall fully endorse such debates. That is a personal view, however, and I am not a business manager.
Question put and agreed to.
Clause 3 ordered to stand part of the Bill.
Clause 4
Use of access charges reviews for
application of strategy
Question proposed, That the clause stand part of the Bill.
Mr. Knight: As the Committee will see, the clause is not particularly enlightening. It merely gives effect to schedule 4. I therefore have a choice as to whether I should state our views about schedule 4 when we come to it or speak now, because the clause implements that schedule. I think that it would benefit the Committee if I set out our views at this stage, before we get into a more detailed debate on the schedule.
The clause relates to the independence of the regulatory authority. There has been some comment in the press saying that that independence is under threat. I do not believe that independence is the major point. The major point is the jurisdiction of the regulatory authority; in other words, what that authority can do, unfettered by interference from the Government. The Secretary of State's insistence that the ORR will remain independent is to some extent missing the point. It is the scope of its jurisdiction that we should be worried about, because the Bill seriously undermines it, which could jeopardise private investment in the railway industry and in other independently regulated authorities.
Column Number: 089
The word of the British Government is at stake in their dealings with the private sector, and I hope that the Minister will say how he intends to square what he proposes to do in the Bill with the statement that the Secretary of State made to Parliament in February in answer to a written question tabled by the hon. Member for Scarborough and Whitby (Lawrie Quinn). I look forward to hearing the Minister's reply, because the two statements—the written statement of the Secretary of State on 9 February and the contents of the Bill—cannot be reconciled.
The power to carry out an access charges review—an assessment of the financial needs of Network Rail for the competent and efficient stewardship of the network—is the regulatory authority's most important function. It gives Network Rail, freight and passenger train operators, rolling stock lessors and suppliers, and infrastructure, maintenance and renewal companies the necessary certainty and security that the provider of the national infrastructure, Network Rail, will have enough money for the competent and efficient operation, maintenance and renewal of that infrastructure for five or more years at a time.
In carrying out an access charges review, the ORR is required to apply an important list of statutory criteria, such as the promotion of efficiency and economy in the industry. It is also required to consider the interests of freight and passenger users of the railway, and the growth and development of the industry. It is not allowed to apply political criteria, because it is recognised that the application of short-term political considerations will be detrimental to private sector confidence. So the establishment of independent economic regulation free of political controls has been shown to be essential to private sector confidence and investment in every privatised industry, including the railways. It is that confidence and investment that finally assures the industry of a bright future and gives investors confidence.
The Government have accepted that principle. One of the first things that they did on coming to office in 1997 was give independence to the Bank of England, but they now appear to be refusing to sustain the same principle in the case of the railways, and I ask the Minister why. Until this Bill was introduced, the Office of Rail Regulation or the Office of the Rail Regulator that it replaces had the right to make that assessment and set access charges accordingly.
Under the franchise agreements between the Government's agent, the SRA, and the private sector passenger train operators, the train operators are entitled to indemnities from the Government against any increase in access charges that may be determined by the independent regulatory authority. Those indemnities are extremely important; they are essential parts of the bargain that the state made with the private sector. They are not limited in amount, so they provide that the state will keep the risk associated with the uncertain condition of the assets of Network Rail; the state takes the risk. It was on the basis of that indemnity that the private sector came into the railway industry, and in my judgment, it is on the basis of that indemnity that it is willing to stay in the industry and continue to invest. That is a
Column Number: 090
fundamental part of the relationship and it should not be interfered with as the Bill proposes.
When the last rail regulator decided in December last year on a £7.4 billion increase in Network Rail's income for 2004–09, the Secretary of State publicly welcomed the decision. He confirmed, as he was legally bound to do, that the Government would honour the indemnities in their contracts with the private sector operators. However, I suspect that while that was going on, the Treasury was very unhappy with the fact that the rail regulator's decision had consequences for it. In essence, it was not happy about the indemnities.
What do the Government propose to do? They cannot dishonour their contracts of indemnity, of course, because private sector operators would be entitled to enforce those contracts and the Government would have no defence against any case. It appears that the next best thing as the Government see it is to limit the jurisdiction of the independent regulatory authority, or in effect to cap the indemnities by legislation. That is what proposed paragraph 1G under schedule 4, to which clause 4 gives effect, seeks to do. Paragraph 1G provides that the ORR may raise access charges at an access charges review only to the limit imposed by the Treasury. The limit is stated to be the public financial resources available.
That is a serious interference in the contracts that the state has made with the private sector; it is a unilateral watering down of a valuable provision that the Government now find uncomfortable. It is an amendment without compensation to the private sector operators, whose contracts are being interfered with, and it could well be a breach of the human rights convention. What advice has the Minister taken on whether the provision indeed breaches that convention?
If the Government are prepared to interfere with private contracts to which they are a party to that extent and in that way, it raises serious issues about the constitutional position of any contract with the state for any public project, not just with the railways. If the Government are prepared to use the pen of legislation to change without compensation the terms of a contract that they have come to dislike, what will be the ongoing effect on other projects?
Ministers appear to be ignoring the fact a solemn contract has been undertaken with the private sector ensuring that the state has to pay money in certain defined circumstances. Having committed themselves in a contract to a set of obligations, the Government should not be able to say that they wish that they had not done so and that they are going to change the rules to their advantage.
With regard to the rail review that was announced in January and is partly to be implemented by the Bill, in a written answer to a question from the hon. Member for Scarborough and Whitby published on 9 February, the Secretary of State assured the House, the railway industry and the wider world that the
''railway is and will continue to be a public-private sector partnership.''
Column Number: 091
Referring to the review, he went on to say:
''The independence of economic regulation has already been clearly set out in my statement . . . The Government also rules out any change to the rights of third parties, which will be protected. There is no question of weakening the effectiveness of economic regulation. The Government recognises that maintaining fully effective and independent economic regulation is critical for retaining investor confidence. There will be no diminution in the regulatory protection of the private sector investors in the railway.''—[Official Report, Monday 9 February; Vol. 417, cc. 1237-8W.]
How can the Minister possibly maintain that this clause and schedule 4 respect those principles and honour those assurances? By interfering in the ORR's jurisdiction, and therefore diminishing the rights of private sector operators to the protection that they are given in legislation, what the Secretary of State said shows how little faith can now be placed in the Government's word. Not only the Government's standing and reputation are at stake in respect of their dealings on the question of sanctity of contract, but those of the country. The provisions are fundamentally objectionable. They should not be in the Bill and we want to see them removed. A few years ago, new Labour got rid of one clause 4; it should do the same with this one.
| 
