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Mr. Howarth: On a point of order, Mr. Griffiths. Is it not normal practice that when an hon. Member addresses the Committee with lengthy quotations, he or she at least references them? The hon. Gentleman seems to be quoting almost at random from a document without giving any referencing or indicating where the quotation begins or ends. That seems an unacceptable way to proceed.
Mr. Chope: I hope that the hon. Gentleman and his hon. Friends have a copy of the fourth special report of 2003–04. If they have and they wish to go through with me the extracts that I am reading from the Office of the Rail Regulator, I hope that they will then be able to join in the debate. I have already said—
The Chairman: Order. At one point in the hon. Gentleman's speech, he referred specifically to parts of the report, but in the past five minutes or so it was not absolutely clear in my mind whether he was continuing to quote from where he had started or had moved on to another part of the report. I cannot recall his giving any page or paragraph numbers.
Mr. Chope: Recently, I have been quoting from paragraph 34, which is on page 27. Prior to that, I was quoting from paragraphs 30 and 31. I shall now quote
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paragraph 35, and I hope that the point of order raised by the hon. Member for Knowsley, North and Sefton, East will not have broken the Committee's train of thought.
In paragraph 34, the rail regulator emphasised that the Government had various options that they could have exercised but funked. Paragraph 35 states:
''The SRA did not do these things, possibly because government did not want it to. They would probably have meant cuts in the intensity and geographical reach of existing services, no new services, no new enhancement, severe reductions in the amount of renewal to be done with consequent higher numbers of temporary speed restrictions and poorer performance, and passenger fare rises well above inflation.''
The Government had options, but they did not want to face up to any of the consequences.
Paragraph 36 continues:
''Government and others have to face the fact that, under the existing system, it is not possible to have 100 per cent. of the existing service pattern and the infrastructure which is necessary to support it for 50 per cent. of their efficient cost.''
Paragraph 37 states:
''In July 2003, the regulatory authority asked government what changes to the SRA's strategies were to be made in the light of the regulatory authority's emerging conclusions in the access charges review. The effective answer given was that the regulatory authority should assume that the existing pattern of services would continue and be rolled forward. It was on that basis that the decision in the 2003 access charges review was taken. It is therefore not correct to say that the regulatory authority decided what the pattern of services should be or, in setting network outputs, went against what government intended. Full account of government's settled intentions was taken.''
Paragraph 38 continues:
''In acting as it did, government by default accepted that its subsidy to the railway would have to rise substantially. If it had cut back on the pattern of SRA-supported services and the intensity of the demands which those services would make of the network, government would have faced a much lower bill. But, as explained above, this would have required government to face the political consequences of severe cuts.''
We are talking about the Government not wanting to face the political consequences of severe cuts, but also being embarrassed about the financial consequences of maintaining the railway in its present condition. They have fudged and funked the matter during the course of this Parliament. Under the auspices of the Bill, they are now trying to enable themselves after the next general election to make cuts in services and railways, to increase fares and so on, and to try to transfer the blame to the new Office of Rail Regulation. That is intolerable, and I hope that if nothing else has been achieved by my right hon. Friend the Member for East Yorkshire in drawing attention to this matter, the public will realise what the Government are up to.
Dr. Pugh: We have had a slightly intemperate debate on an important clause and the subsequent schedule. The system in our country that we are trying to regulate is one of private companies renting trains to private operators franchised by public bodies that run on track owned by private but not-for-profit companies that are subsidised by other public bodies in the public interest, adjudicated by an independent public body, with the backstop of the Competition Commission. That is a somewhat Byzantine arrangement, which needs a fair degree of sorting
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out. I wonder who invented such a complex and difficult to run system.
When we survey those facts, it has to be said that there is not a perfect market—we are not dealing with a standard marketplace in any sense. Uncannily, it does not always work smoothly. Criticism so far has been directed at the peculiarities of that particular market. It has been fiercely criticised because it has involved huge amounts of public subsidy going to private companies, which have shouldered very little risk in the process. That is why people are trying to change or tighten up some of the arrangements, while preserving some of the features established by a previous Government.
All clause 4 and schedule 4 do is to provide that when the complex Byzantine system breaks down it can be reviewed reasonably coherently, and lay out a way in which that can be done and a set of procedures associated with that. The provisions put various triggers in place whereby affected parties can get access charges reviewed.
10.45 am
The bulk of schedule 4 seems sensibly inclined towards getting people to share as much information as possible. A number of the paragraphs in schedule 4 begin by saying that information should be provided by one person to another. The clear implication is that in the past decisions have been made without adequate information or without adequate notice being taken of the interests of all the affected parties. To that extent, that has to be a bit of progress. Nobody is against information being shared and people taking notice of all the priorities of all the parties concerned.
The meat appears to be in new paragraphs 1G(1) and 1G(2). The right hon. Member for East Yorkshire pointed out that 1G(1) was the real bugbear here. It does slightly change the rules of the game. It states:
''The Office of Rail Regulation must conduct an access charges review in the manner that it considers is most likely to secure that the implementation of the review will make the best and most practicable contribution to the achievement of—
(a) what the Secretary of State wants to be achieved''.
That is an adjustment to the market. Given that the Government are putting considerable amounts of public funds into the process, it is not an improper adjustment.
Neither paragraph alters who ultimately makes the decision. 1G(2) concludes:
''it is to be for that Office to determine, for the purposes of the review, how much of what is wanted should be achieved''.
It then adds that if the public funds do not accommodate what the Secretary of State wants, the ORR will make the decision about what is to be done thereon. No private company will be put in a position of having to deliver some public good that is clearly not resourced for. That strikes me as fair, as does 1G(1), because it simply adjusts the rules of the game in such a way as to make it impossible in future for the rail regulator to splash out huge amounts of public funds against the public interests. That cannot be a proper
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thing for any public body, independent or otherwise, to do. It was severely criticised by the Select Committee.
There is a change in the market here. I think that the Minister will be honest enough to admit that. But we never had a perfect market in the first place. No one should pretend that any of the players entered it believing or understanding it to be a perfect market. If they did, they simply did not understand what the privatisation of railways had involved.
Mr. McNulty: That is a fairish reflection. I would only challenge the hon. Gentleman's point about there being a fundamental change to the market. There is not. There is a fundamental change to the relationship between the ORR and the Secretary of State. The Government set the strategy and the ORR is still absolutely responsible for economic regulation. That is not appropriately characterised as a change to the market, but it is a substantive change to the relationships within, as I suggested earlier. There are substantive changes, post-SRA, to the relationships that exist in the rail industry. We made that clear. That is essentially the purpose of the Bill.
The hon. Member for Christchurch was 100 per cent. wrong in what he said. I repeat purely for the record that when he refers to the ORR he is referring to the previous incumbent and a report that predates the Bill by some five or six months. The hon. Gentleman is free to characterise the ORR as a stooge; it is a shame that he did not withdraw that remark but by implication that was there. The previous incumbent and the ORR are, as of today, perfectly comfortable and relaxed about schedule 4 and clause 4.
The notion that schedule 4 is about disengaging the Government from blame or decision making could not be further from the truth. Schedule 4 is about requiring the Government to engage fully in, among other things, a review of access charges. It is not about transferring blame for unpopular decisions to the ORR. Its point is to ensure that it is clearly the Government who determine rail strategy, fully taking into account all their obligations to private sector contracts, and the effects of those on the total funding needed for the railways. It must make sense. The Government have set out a strategy for their outputs: yes, of course, independent economic regulation; and yes, of course, a regular quinquennial review of Network Rail and what it needs for the forthcoming five years. All that makes perfect sense. With the best will in the world, the hon. Gentleman's intemperate rant is entirely for the birds.
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