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European Standing Committee A Debates

European Standing Committee A

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European Standing Committee A

The Committee consisted of the following Members:


Mr. David Chidgey

†Dean, Mrs. Janet (Burton) (Lab)
Dhanda, Mr. Parmjit (Gloucester) (Lab)
†Foster, Mr. Michael Jabez (Hastings and Rye) (Lab)
†Francois, Mr. Mark (Rayleigh) (Con)
†Green, Matthew (Ludlow) (LD)
Hamilton, David (Midlothian) (Lab)
Hoban, Mr. Mark (Fareham) (Con)
Lamb, Norman (North Norfolk) (LD)
Marris, Rob (Wolverhampton, South-West) (Lab)
Palmer, Dr. Nick (Broxtowe) (Lab)
Viggers, Mr. Peter (Gosport) (Con)
Vis, Dr. Rudi (Finchley and Golders Green) (Lab)
†Wright, Iain (Hartlepool) (Lab)
Geoffrey Farrar, Committee Clerk

† attended the Committee

The following also attended, pursuant to Standing Order No. 119(5):Dunwoody, Mrs. Gwyneth (Crewe and Nantwich) (Lab)
Knight, Mr. Greg (East Yorkshire) (Con)
McNulty, Mr. Tony (Minister of State, Department for Transport)
Mahmood, Mr. Khalid (Birmingham, Perry Barr) (Lab)
Murphy, Mr. Jim (Lord Commissioner of Her Majesty’s Treasury)

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Wednesday 9 March 2005

[Mr. David Chidgey in the Chair]

Third Railway Package

2 pm

The Minister of State, Department for Transport (Mr. Tony McNulty): I welcome the opportunity to debate this package of proposed European Community measures. The Committee will be grateful that I do not intend to call out the numbers of the documents relating to the proposals. As a brief introduction, I wish to give an overview of the proposals and the Government’s approach to them. It has been suggested that the proposals be known collectively as the third railway package. They follow on, stunningly, from the second package and the first package. They are part of the Commission’s overall strategy to revitalise the Community’s railways and create a single European rail area.

Having read all the paperwork, members of the Committee will know that there are four legislative proposals, the first of which is a directive extending the rights of access to the rail network for international passenger services. It aims to allow operators to develop new markets, while protecting public services. The second proposal is a regulation on the rights and obligations of passengers making international rail journeys, the aim of which is to make the railways more attractive to passengers. The third proposal is a directive on the certification of train drivers and other train crew members. It aims to facilitate the free movement of train crew within the Community, while maintaining a high level of safety. Finally, a regulation is proposed on compensation for freight customers in the event of non-compliance with contractual quality obligations. It aims to raise the quality of service offered to customers.

The Government support the Commission’s broad aim that the rail system needs to operate efficiently and meet the needs of passengers and freight customers, thereby enhancing its role in our transport system. That, in our view, requires rigorous cost control and a strong focus on performance improvement. As hon. Members will know, the Government are implementing several structural and organisational changes in the UK to achieve those ends, as set out in the July 2004 White Paper, “The Future of Rail”.

There are elements in the proposed package that the Government welcome as supporting such objectives by providing opportunities for the delivery of better services to customers, without detrimental impact on UK rail finances. However, the Government also have worries about the proportionality and cost-effectiveness of a number of aspects of the proposals. Proposals that add significantly to the net costs of the industry will result in reduced services or higher fares.
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That will not benefit customers, which is why, in negotiations, we are seeking substantial changes, including the dropping of the freight customer contracts proposal. Hon. Members will recall that I advised the Committee that the terms of the general approach reached on the train driver licensing proposal in the Council last December dealt with our concern that the economic case had not been made for applying the proposed EC regime to train drivers who worked only in their home member states.

The Government will continue to work with their partners to achieve a final outcome on the package that is cost-effective for the UK. We are not there yet, by any means, on some aspects of the package. I look forward to answering questions this afternoon.

The Chairman: We now have until 3 o’clock for questions to be put to the Minister. I remind members of the Committee that questions should be brief and asked one at a time. There is likely to be ample opportunity for all hon. Members to ask several questions.

Mr. Greg Knight (East Yorkshire) (Con): The Minister said that he supports the broad aim of the package. He then identified a couple of areas with which the Government are not in agreement. What other parts of the package do the Government currently not support?

Mr. McNulty: At the risk of being picky and pedantic, I wish to say that the Government support the Commission’s broad aim that the rail system operates efficiently. As I have said, at the moment we do not support the element of the package that concentrates on freight. It is not cost-effective, nor will it work. It will not achieve the results that it wants. We agreed at the December Council that, at the least, there should be substantive cost-benefit analysis of regulatory impact assessments on utilising the element of the directive on train driver certification when train drivers are only ever domestic. The Commission has agreed that and, until the RIA shows that benefits outweigh costs, we are not minded to agree that certification should be applied domestically under the directive. However, as the right hon. Gentleman will know, we are still committed to coming up with a certification and licensing system, as was proposed by the Cullen report; but that would be for our own domestic purposes, not for the purposes of the directive.

We agree on the international element—that is, that anyone who seeks to drive a train on both sides of the channel tunnel on a regular basis may have to come under the directive, but we are still broadly debating that element. We will come to where we have reached on that.

Matthew Green (Ludlow) (LD): May I say what a delight it is to serve under your chairmanship, Mr. Chidgey? [Hon. Members: “Crawler!”] Could the Minister flesh out the Government’s thinking on the use of the framework as a basis for opening up international passenger services to competition? As I understand it, there is some disagreement in Europe as
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to whether there should be a maximum length for any contract. There is pressure for a 10-year maximum length, but I believe that the Commission does not agree with that, although many MEPs are pushing in that direction.

Mr. McNulty: As I say, international liberalisation is one of the areas that is particularly underdeveloped, in terms of there being a broad approach across the states. We start from the point of view of being more than happy for international passenger services to be opened up to competition. So, we accept the broad thrust, in terms of liberalisation, but—again, this is partly a function of geography—the proposals may have a limited effect on the UK. However, there are potential benefits for UK companies that may want to seek entry into continental markets.

The hon. Gentleman is entirely right: if the starting point for many member states is, in part, the extent to which they have liberalised their own domestic networks, there will be an array of views, to say the least, across the assorted Governments. The Commission has by no means reached the stage where there is any unanimity.

In passing, let me answer a question that the right hon. Member for East Yorkshire (Mr. Knight) asked prior to the Committee. The earliest that this package—if it remains a package, and if these four elements stay in it—would be implemented is the back end of 2006, but that is a very optimistic time scale. Community law already provides for 10-year contracts—under directive 2001/14, apparently—but it is subject to an array of conditions. All those subterranean-type discussions are still going on, but the broad thrust is to ask whether, collectively, all member states agree that there should be greater liberalisation of international travel. Not everyone is at that starting point yet, so there is still a way to go.

Mr. Mark Francois (Rayleigh) (Con): May I welcome to you to the Chair in a polite but non-unctuous manner, Mr. Chidgey?

Mr. McNulty: A courteous crawler.

The Chairman: Order. Mr. Francois.

Mr. Francois: The Minister has explained the Government’s position with regard to certification of drivers quite clearly. Can he give us at least an approximate feel for the proportion of drivers who are likely to drive internationally and the proportion who are likely, realistically, to drive only domestically? Is it, say, 10 per cent. and 90 per cent. respectively? What is the balance of those two proportions?

Mr. McNulty: Roughly 5 per cent. will drive internationally, unless the bit of paper winging its way to me says otherwise. [Interruption.] It says 2 per cent., so it is between 2 and 5 per cent. That is very small, clearly not least because of geography. We are talking not simply about those train drivers who go through the tunnel, but those who then carry on on the French or Belgian networks.

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We are very clear that until the benefits of the certification of train drivers for these purposes far outweigh the costs to the UK, that is something that we would resist. There was broad agreement in last December’s Council that we need regulatory impact assessments and cost-benefit analysis before we go down that route and embrace the directive domestically as well as internationally.

Mr. Michael Jabez Foster (Hastings and Rye) (Lab): Many of the proposals depend fundamentally on there being a trans-European network to run on. Do the proposals include funding for opening up or enhancing those lines?

Mr. McNulty: In terms of the third package, the answer is no. TEN funding and other, related elements are part of the wider domain and remit of the Transport Council. The funding of TEN is outwith the four legislative elements of the third railway package.

Mr. Francois: May I ask the Minister a question on a procedural matter? When the draft directives and the regulation are decided, will they be subject to unanimity, if there is disagreement, or qualified majority voting?

Mr. McNulty: It is not just a matter of unanimity or QMV; there is a range of processes involving the view of the Commission and the European Parliament. When the proposals are finally settled and resolved in the Transport Council it is by qualified majority voting. In my limited experience of the three Councils that I have attended, as in many European forums, it is not necessary to push measures through the QMV route just because you can. Attempts are made on this and other matters in Europe to try, if possible, to get some unanimity, rather than shoving things through by QMV.

Mr. Greg Knight: How far has the discussion proceeded with regard to the certification of train crews? For example, is there likely to be a language test? Would a UK driver who wants to take a train into Europe need a knowledge of written as well as spoken French, so that he would be able to read warning signs on or near the track?

Mr. McNulty: That was certainly part of the discussion at the December Council, where our position was that many of our drivers, apart from between 2 and 5 per cent., will not be covered by the proposal until benefits far outweigh costs; it is not something that we pursued. From memory, I believe that there were some elements of linguistic criteria or language tests in the wider directives.

Interoperability specifications deal with issues of language; standard terms for communication will be used. That is an element of the wider directive on the terms of interoperability, but it was not discussed in any detail in December because of our position, which I have already outlined.

Mrs. Janet Dean (Burton) (Lab): I am mindful of the fact that there are sometimes train driver vacancies. Would the draft directive on train driver licensing
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increase the number of drivers from other European countries who could work here? Does the proposal allow for that?

Mr. McNulty: That is an entirely fair point. Part of the thrust of the directive is to get a degree of standardisation and some interoperability. Our position since last December is that we do not even want to consider the matter in detail until the benefits far outweigh the cost in the UK context for those who, for better or worse, we could call international drivers because they go through the channel tunnel. However, it is not a matter we have explored, although I will return to it.

Some train operating companies already recruit from abroad, so there is no impediment to doing so now. However, the directive will make it easier because a set of skills-based criteria will be put in place as part of the standardisation of interoperability. My hon. Friend makes a good point.

Matthew Green: The Minister will be aware that with regard to the international rail passengers’ rights and obligations part of the package, MEPs noted that there was cross-party agreement in the Transport and Tourism Committee of the European Parliament that the scope of the legislation should be widened to include domestic matters. Do the Government have any intention of agreeing that the scope should be widened to cover compensation for domestic as well as international passengers?

Mr. McNulty: We already have elements in place that give a wider base for passenger rights than what is set out in the directive. I am aware of what the European Parliament was suggesting, but I suspect, without reading the MEPs’ minds, that they were aiming their fire at countries other than the UK. We do not object in principle to widening the scope, but we need to see the detailed provisions and judge the balance between benefits and costs imposed on our domestic rail network.

Mr. Francois: The Minister intimated, in response to an earlier question, that there would be some additional domestic regulation of drivers in the post-Cullen environment. Bearing in mind that all proposals are still under discussion, will he summarise for the Committee the likely principal differences between what he expects to be the international regime for the 2 to 5 per cent. of drivers and what he expects to be the domestic regulation for the other 95 to 98 per cent. in the UK under Cullen?

Mr. McNulty: In the first instance, I do not want to pre-empt the discussions currently taking place at the Health and Safety Executive on what would be required to implement the Cullen recommendations. None the less, our view on the directive and proposals is simply that subsidiarity would dictate that as, more often than not, our train drivers do not cross national borders other than our internal ones, we would not want the international proposals to prevail unless their benefits far outweigh the costs. Let us wait and see
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what the HSE says about Cullen so that we can compare and contrast the two proposals far more easily, but we should not forget subsidiarity, which still weighs in the balance. As I have said, our starting point throughout the whole package is that we broadly agree with its thrust but that unnecessary costs should not be imposed on our industry simply to fit in with the wider context.

Mr. Knight: I return to the certification of drivers. Reference is made in the papers to certain educational requirements, such as nine years’ secondary education and two or three years’ post-secondary education in technical matters. Is the Minister adopting a flexible approach on that? It occurs to me that, should the certification proceed to fruition, the Government may want to give a pass or a bye to existing drivers who have shown themselves to be competent in every respect—they may have 20 years of good service—but who do not have the minimum educational requirements suggested in the draft directive.

Mr. McNulty: In the context of the broader points of debate that have been made thus far in Council, including my point about subsidiarity, there has been great discussion among other member countries about what they call grandfather rights and about how the skills base of existing drivers can be incorporated and recognised with the degree of flexibility that the right hon. Gentleman suggests. That is a key element guiding much of the debate in the other member states, for which subsidiarity, in our view, is perhaps less important as their systems include far more cross-border travel.

Mr. Knight: I am grateful to the Minister for that reply, and he should know that we would support him in taking that view.

The papers refer to a proposal to allow

    “Member States to restrict competition in particular markets which are the subject of a public service contract (i.e. a contract to provide non-commercial services in return for compensation by a State authority)”.

How does the Minister see that applying to the UK network? As a public service grant is given to railways in the UK, it could be argued that the whole UK network should be protected from overseas competition.

Mr. McNulty: I think that the provision applies more readily to branch lines and others in the European context that simply would not function without substantive public input. It is almost a backstop provision, in that if there was greater liberalisation in many European states—there has been a limited amount thus far—there would still be some protection. However, none of it would impact on the moderated competition set out and organised by the Office of Rail Regulation in the UK. I do not think that there is any situation in which the element to which the right hon. Gentleman refers would impact on the UK. It is there as a backstop for many examples—none of which springs to mind—in the European context, where a higher level of public subsidy is maintained for elements of what is in most cases still a publicly run network, although significant
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discussions are going on. Perhaps people are a little timid in some cases, especially the Germans, about their own domestic situations.

Mr. Knight: On that point, does the Minister agree that although the provision might be justified at one moment in time, it should be kept under regular review? What mechanism will be in place to ensure that some of our European partners do not use the provision permanently to prevent competition from taking place? As the network develops, the restriction may well no longer be justified.

Mr. McNulty: That is an entirely fair point. We shall seek to ensure that there are review processes in the document and the sort of flexibility that the right hon. Gentleman suggests. The larger umbrella overlying all this will be elements of the state aid regulations and provisions that govern throughout the EU in the wider context. However, it is a fair point that these matters should be subject to review, not least because we feel that, perhaps some way down the line, greater flexibility and liberalisation will become the order of the day in the European context. That makes it all the sharper if there are still elements that are protected and looked after in this fashion.

Mr. Knight: What is the Government’s position on the strict liability provisions? Are any aspects of that still under discussion?

Mr. McNulty: Not as I understand it, unless I am told otherwise, in the context of the four legislative proposals on the table in relation to the third railway package. The provisions are still under discussion but not, as I understand it, in the context of this package. However, if I find out any more subsequently or the right hon. Gentleman wants to write to me in a broader context, I will be more than happy to respond.

Mr. Knight: To what extent has the danger of a too-generous compensation package impacting on fare levels been part of those discussions? Has the Minister any ongoing concerns in that respect?

Mr. McNulty: Our core ongoing concern governs all that we are trying to do on this package and the other packages: there is a balance between securing greater rights for passengers in the international context, and costs. The right hon. Gentleman’s point about the balance between implementing further rights and the impact on the fare base and level is well made. It informs and will inform our discussion on these matters as they develop.

Mr. Knight: I presume that, in respect of the parts of the package on which the Government are still negotiating, the Minister will consult widely key players in the industry in the UK. What further opportunities does he expect there to be for parliamentary discussion before the package is finally signed off as a done deal?

Mr. McNulty: If I can facilitate this, I will. I would assume that, as and when things advance—as I said initially, many elements of the package are not terribly well advanced—there will be scope to come back, if
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not to the European Scrutiny Committee in some shape or form, then to Parliament, because this is an important further development building on the previous two packages.

On the point about international rail passengers’ rights, the broad position of most member states is that that element of the directive is too burdensome, and there is still a lot more talking to be done. Even using the most optimistic time scale, these measures will not come into force until the back end of 2006, so I am sure that there will be scope for subsequent parliamentary review and discussion when the matters are far more developed.

Matthew Green: May I bring the Minister back to market access for international passenger travel? Set out in the regulatory impact assessment—on page 269 of the bundle of documents—is option 3, which is:

    “The EC proposal but without restriction on cabotage.”

The conclusions of the RIA on page 271 suggest that option 3 might lead to opportunities for

    “UK firms to launch new services in continental Europe”.

Will the Minister speak more on that point, because one consideration should be the extent to which British companies can benefit from increased opportunities in Europe?

Mr. McNulty: In that context, and with regard to the broader thrust of greater liberalisation, the UK rail industry is far more advanced in terms of working in a liberalised market environment than any other European domestic rail industry, so we start with certain advantages. Given the development of our industry, it is well placed to take advantage should opportunities arise, through either the EC proposal or the proposal without restriction on cabotage.

As recently as last October or November, it looked as though the Bundestag would finally take tentative steps towards deconstructing the state rail industry—Deutsche Bahn—but it missed the boat and decided to leave it alone for another two or three years. I was speaking to a representative of a leading British industrial organisation, who said that they had finally broken into North Rhine Westphalia, which will probably be the largest domestic element of the market in Germany. When I asked them to what extent, they said, “We think we’ve got about 3 per cent. of the market so far.” That would mean they had 3 per cent. and Deutsche Bahn had 97 per cent, so small inroads are being made in terms of industrial opportunities in rail. Any move in the direction of some elements of the package will, given the comparatively developed nature of our industry in the private sector, lead to a degree of opportunity for the UK rail industry.

Mr. Knight: The documents refer to assisting persons with reduced mobility, which we all welcome. Have the discussions in any way ring-fenced the definition of reduced mobility, because “reduced mobility” could include not only someone with a minor walking disability, but could cover the whole spectrum through to someone who is bedridden and presents themselves at a station on a trolley? Will railway companies—provided that they have been
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given the notice referred to in the documents—be expected to accommodate any person with reduced mobility, even if they are virtually bedridden?

Mr. McNulty: Rather like much of what we do domestically through the Disability Discrimination Act 1995 and other measures, there is a degree of flexibility and practicability. The definition is not locked down entirely; it is still under discussion. However, there is broad acceptance among members that there needs to be a clear and sensible definition as well as scope around the edges for that degree of flexibility to allow for practicability.

Mr. Francois: The Minister has given us some background on the genealogy of the third railway package, in that it has led on inexorably from the first railway package and the second railway passage. Can he give us some idea of whether the third railway package has been affected in any way by the enlargement of the European Union—either financially or by the newly arrived members of the EU taking a different attitude to the package?

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