|
Mr. Chope: It is as plain as a pikestaff that clause 4 and schedule 4 change the economic regulatory regime, and, in anticipation, the Office of the Rail Regulator said during the consultation process that there was no need for the Government to do so because they already had the necessary power in relation to the future financing of the railways. It also said that if the Government acted in the way in which they are now acting, they would be in breach of the formal assurances that the Secretary of State gave Parliament and the financial community on 9 February.
My right hon. Friend the Member for East Yorkshire has referred to quite a lot of what the Secretary of State said in answer to a written question from the hon. Member for Scarborough and Whitby (Lawrie Quinn) at column 1237W on 9 February, but let us look at it again. He states:
Column Number: 095
''The review which I announced on 19 January 2004 . . . will not change the Government's acceptance of the Regulator's determination of Network Rail's income for the next five years as set out in his December 2003 Final Conclusions and any further conclusions he may reach; and the Government will ensure that the Strategic Rail Authority has sufficient funds to meet its resulting commitments. As I made clear in my statement of 15 December 2003 . . . regulatory promises will be honoured, and the Government recognises, and is content, that only the Regulator can re-open his determinations.''—[Official Report, House of Commons, 9 February 2004; Vol. 417, c. 1237W.]
However, the Bill gives the Government the power to force the rail regulator, against his wishes, to reopen his determinations and to change the whole regime.
Mr. McNulty: This simply cannot persist. The hon. Gentleman has said again that we are going against the wishes of the rail regulator, leaving the Committee with the clear impression that Mr. Christopher Bolt, the current rail regulator, who is chairman of the ORR, is against clause 4 and schedule 4. We know from his July statements that Tom Winsor is against virtually everything, and that is perfectly fine. However, the hon. Gentleman cannot persist in invoking him and his words in July, giving the Committee the misleading impression that they are the words of the current incumbent at the ORR.
I must tell the Committee—the hon. Gentleman has not been forthcoming with any evidence to the contrary, and it would be wrong, even if he did—that the current ORR is fully satisfied with the clause, the schedule and the relationship that they establish. The hon. Gentleman has given us a nice history lesson, but it is utterly misleading to suggest that the current ORR is against the provisions, because they are not. He can give us a history lesson and wax lyrical about the previous incumbent, but Tom Winsor's views do not prevail today; the ORR is signed up to the clause and the schedule, and it is wrong to suggest otherwise.
Mr. Chope: I am not going to get drawn into discussing who is a stooge of the Government and who is not. What I am concerned about is that the independent ORR—
Mr. McNulty: On a point of order, Mr. Griffiths. It cannot be in order for the hon. Gentleman to call Mr. Christopher Bolt, the current incumbent at ORR, a stooge of the Government, or at least to imply that. I ask the hon. Gentleman to withdraw that implication, if not the direct reference to Mr. Bolt.
The Chairman: That is not a point of order. The phrase is used in debate, and does not relate to the proceedings in which Members directly call each other things. I hope that the hon. Member for Christchurch has heard what has been said.
Mr. Chope: Obviously, I have heard what has been said. I said that I did not want to go down that route, and I shall not go down that route.
Mr. Howarth: On a point of order, Mr. Griffiths. Is it not a convention of the proceedings of this House that if an hon. Member—I stress the word ''honourable''—gives misleading information to a Committee or elsewhere, he should correct it?
Column Number: 096
10.30 am
The Chairman: The Minister has already pointed out that in quoting from the report and the ORR's view at the time, the hon. Member for Christchurch is accurately reflecting what that office believed at the time. The Minister has also accurately pointed out, however, that with the changes that have taken place, there has been no such direct comment on the Bill itself. We have debated this matter, so perhaps we can move on to the substance of the clause and what it implements in the schedule.
Mr. Chope: I am grateful, Mr. Griffiths.
It is important to consider why it is necessary to introduce the clause and the accompanying schedule at all. The ORR's report is not ancient history; it was published in July, which is only a few months ago. It may be very embarrassing for the Government, who may want to draw a line under it—an expression that is popular with them. In paragraphs 69 and 70, the ORR recognises the following:
''It is for government to decide how it wishes to spend its money. Overall and in the long-term, all government expenditure on the railway is discretionary. But once it has made that decision and entered into binding commitments in that respect—i.e. through franchises or other contracts—it has exercised its discretion and the expenditure has become non-discretionary. Government must honour the commitments it makes. And it must make them in a timely way.
It is of course perfectly lawful for government to make binding commitments—franchise agreements and associated instruments—which last for only a year or two, perhaps three, at a time. This would allow government to sculpt its expenditure obligations to its political priorities and change them from time to time in the short-term.
Such an approach would mean that the railway industry would return to almost the annualised financial regime it had under nationalisation with the attendant harm to private investment, lack of confidence, stability, predictability and the opportunity to make reliable and sustainable plans, but it could be done.''
That is exactly what the Government are doing in clause 4 and the accompanying schedule.
In paragraph 71, the ORR continues:
''Equally, it would be inimical to private sector confidence if the contracts government makes were to provide for a unilateral right of government to turn down the quality or extent of the network on which train operators and their backers rely, unless there were secure provision for the payment of adequate compensation. Even then, it is likely that private sector businesses would be more reluctant to invest in new rolling stock if they face the risk of a politically-imposed slow decline in the quality of the infrastructure on which they must run, for fear of the difficulties, delays and expense of securing adequate financial compensation for the effects on their businesses of that decline. Government does not need this right to act mid-term in the life of a contract. It has all the power it needs to make its plans before franchises and other contracts are let, and to communicate those decisions to the regulatory authority in good time and then allow the system to set the network outputs and the charges accordingly.''
That sets out the ORR's regime and understanding, and that background should inform our debate on the clause and the schedule. One of the Government's problems is that they know jolly well that they could have intervened in the previous debate on access charges, and they could have effected a different result, but they funked doing that because they did not want to take the political blame. Now, they are trying to set up a regime in which they can transfer the blame for such decisions, which have a major impact on the
Column Number: 097
quality and nature of our railways, to the Office of Rail Regulation. That is a despicable way to behave, and the Government are absolving themselves of what should be their full responsibilities.
It is worth reminding ourselves of where the Government reached in the reviews and debates about the level of access charges. The ORR said at paragraph 30:
''There have been two access charges reviews since Railtrack was privatised in 1996. The first concluded in October 2000; the second ended in December 2003. In both cases, government could have acted early to secure a result which would not have led to the increases in access charges which in fact came about. But its engagement would have had to have been much greater. In the first access charges review . . . the degree of engagement by the SSRA (as the agent of government) was not strong, and the regulatory authority was compelled to conclude that broadly the existing pattern of services should be rolled forward, with some improvements in performance. Access charges were set accordingly and Railtrack became entitled to a 50 per cent. increase in its income.
In the second access charges review . . . things did not go according to plan either. Whilst the SRA, the Department for Transport and the Treasury were much more closely involved with the regulatory authority, and had access on a continuing basis to a very large amount of information about the emerging picture as the 15-month review proceeded—which showed by how much the revenues of Network Rail would have to rise to maintain the existing pattern of services—they failed to take the necessary avoiding action which could have led to much lower levels of access charges and compensating grants . . .
In February 2003, the Rail Regulator informed government that if access charges were not to rise substantially at the end of the review (to be announced in December 2003 and take effect from 1 April 2004), the SRA should then (early 2003) be making material changes to its franchising and other strategies to impute lower (and therefore cheaper) network outputs. It would have done this by:
(a) not entering into new franchises for service patterns which implied network outputs as high as the existing levels;
(b) renegotiating existing franchises so as to lower implied network outputs;
(c) exercising rights under existing franchises to lower passenger service requirements; and
(d) negotiating compensation for freight operators to persuade them to lower their network output demands''—
|
