 House of Commons |
Session 2007 - 08 Publications on the internet General Committee Debates Channel Tunnel Rail Link (Supplementary Provisions) Bill |
Channel Tunnel Rail Link (Supplementary Provisions) Bill | ||||||
The Committee consisted of the following Members:Chris Shaw, Committee
Clerk
† attended the
Committee
WitnessesMr.
Tom Harris, MP, Parliamentary Under-Secretary of State for
Transport.
Graham Dalton,
Director, Rail Projects, Department for
Transport.
David Lunn, Divisional
Manager, Major Projects, Department for
Transport.
Public Bill CommitteeTuesday 4 December 2007(Morning)[Mr. Peter Atkinson in the Chair]Channel Tunnel Rail Link (Supplementary Provisions) Bill10.30
am
The
Chairman:
Before we begin, I have a few housekeeping
announcements to make. If men wish to take off their jackets, they may.
Will everyone please ensure that mobile phones are silenced? I remind
the Committee that there is a Ways and Means resolution in relation to
the Bill, of which copies are available in the Room, and that adequate
notice should be given of amendments, because it is not my general
intention to call starred amendments.
The process of taking oral
evidence in Public Bill Committees is still quite new, so it may help
if I briefly explain what we are going to do. Having said that, it is
as new to me as it probably is to many of you, so please bear with us.
The Committee first considers the programme motion on the amendment
paper. Debate on that, if it is necessary, is limited to half an hour.
We shall then proceed to a motion to report written evidence and
afterward to a motion to permit the Committee to deliberate in private
in advance of the oral evidence session. I hope that we can take those
latter motions formally. The purpose of the private session is to
consider the brief that we have been given, and to allow questions to
be dealt with.
Assuming that the second motion
is agreed, the Committee will then move into public session for the
oral evidence. If the Committee completes its questioning of witnesses
in good time, we will move on to clause-by-clause consideration. If we
manage that before 1 pm, we shall have to move to Committee Room 12,
for reasons that I shall not bore you with. We shall adjourn for 15
minutes while that happens. Finally, will speakers please remain seated
when they speak? The reason is that the microphones in this Room do not
work.
Mr.
Greg Knight (East Yorkshire) (Con): On a point of order.
If we are to remain seated, Mr. Chairman, will you indicate
the method by which you would prefer us to catch your
eye?
Ordered,
That—
(1)
the Committee shall (in addition to its first meeting at 10.30 a.m. on
Tuesday 4th December)
meet—
(a)
at 4.00 p.m. on Tuesday 4th December;
(b) at
9.00 a.m. and 1.00 p.m. on Thursday 6th
December;
(c)
at 10.30 a.m. and 4.00 p.m. on Tuesday 11th
December;
(2) the
Committee shall hear oral evidence in accordance with the following
table:
TABLE
(3)
the proceedings shall (so far as not previously concluded) be brought
to a conclusion at 7.00 p.m. on Tuesday 11th
December.
Ordered,
That,
subject to the discretion of the Chairman, any written evidence
received by the Committee shall be reported to the House for
publication.—[Mr. Tom
Harris.]
Ordered,
That,
at this and any subsequent meeting at which oral evidence is to be
heard, the Committee shall sit in private until the witnesses are
admitted.—[Mr. Tom
Harris.]
10.33
pm
The
Committee deliberated in
private.
10.39
am
On
resuming—
The
Chairman:
We will now hear oral evidence from
representatives of the Department for Transport and I welcome the
witnesses here today. Minister, will you introduce your colleagues to
the
Committee?
Mr.
Harris:
I have here David Lunn, divisional manager
for the financing of major projects at the Department for Transport and
Graham Dalton, director of rail projects. They will be answering with
me this
morning.
Q
1
Stephen
Hammond (Wimbledon) (Con): May I ask the Minister, in
relation to clause 1, what exactly in the provisions of the Channel
Tunnel Rail Link Act 1996 and the Railways Act 2005 led him to believe
that there was any uncertainty with regard to High Speed
1?
Mr.
Harris:
It may seem unusual to begin a piece of
legislation with the phrase “for the avoidance of doubt”.
I am not sure whether any other piece of legislation starts in that
way. The problem is that if two pieces of legislation speak to the same
subject, there can be confusion as to what Parliament intended. The
Department for Transport and London and Continental Railways feel that
a potential purchaser of the infrastructure may not be sufficiently
clear about how the Secretary of State’s powers might be used.
It is nothing more than a clarifying clause and does not give any
additional powers to the Secretary of
State.
Q
2
Stephen
Hammond:
I understand that point, and I am grateful for
the Minister’s briefing to the two Opposition Front-Bench teams.
However, having read the Act, I found it difficult to understand why
the ambiguity arose. Did the Minister assess the likelihood of that
ambiguity occurring?
Mr.
Harris:
I will bring in David Lunn, who may be able
to talk more about that aspect. I do not think that an actual
calculation was made in empirical terms about the 50 or 60 per cent.
chance of some kind of misinterpretation of the law. Obviously, if we
are introducing new primary legislation, we want to ensure that, at
some point in the future, we do not have to bring forward further
legislation to clarify what we have already done. This was a real
belt-and-braces approach. With your permission, Mr.
Atkinson, I would like to bring in David to clarify the
matter.
David
Lunn:
In the Channel Tunnel Rail Link Act 1996, the
power to fund mentions construction, and not operation. The 2005 Act
states that the Secretary of State can fund railways for whatever
reason they might want to do so. We took legal advice, which said that
in most circumstances, a reasonable view of a court would be,
“Fine, you can fund,” but there might be doubt at the
back of a potential purchaser’s mind, and that would hit value.
All we seek to do here is put the measure beyond any doubt at
all.
David
Lunn:
The matter was brought to our attention by LCR
in the first instance, so we took our own view. Our legal advisers
agreed that there was room for doubt there, so we thought it best to
clarify.
Q
4
Susan
Kramer (Richmond Park) (LD): The support that was provided
by the Government for construction financing for this project was
presumably to reduce the risk associated with the construction period,
which was obviously a highly uncertain time. That risk has now fallen
away, but the same guarantees remain in place. Do you envisage a
refinancing that removes all or part of those guarantees, or are you
anticipating that those guarantees will remain in place over the
foreseeable
future?
Mr.
Harris:
The purpose of clarifying the
Government’s intention in clause 1 is
“for the avoidance of
doubt”.
The Secretary of
State retains powers to offer subsidies and financing to train services
running on HS1. In terms of any re-financing package, may I be
permitted to bring in David Lunn again?
David
Lunn:
Basically, existing guarantees
are there for the period of the debt and will not change. However, what
might change is if there is a new purchaser of the railway. In that
case, it would be for the purchaser of HS1 to raise its finance on its
own account. We would not be looking to guarantee that, and that is the
policy
intention.
Q
5
Mr.
John Horam (Orpington) (Con): Is this avoidance of doubt
solely related to a possible sale of the operation, or is it also a
factor that you think that there might be some re-financing of existing
debt in the future, with the ownership remaining the same?
Mr.
Harris:
The intention of the Bill is to clarify the
law in such a way that a restructuring is
feasible.
Mr.
Harris:
Yes, obviously. Once the Bill becomes an Act,
it will clarify the Secretary of State’s role even before a
restructuring or possible sell-off of
HS1.
Q
7
Mr.
Horam:
What I am trying to get clear is whether this saves
the taxpayer money and reduces the cost to the Department, even if the
ownership remains the same in the event of any re-financing. Does the
Bill make it easier to re-finance?
David
Lunn:
All things being equal, if we need to raise new
debt, clarity is a good thing. That would remain the case whether there
was a new buyer or potential
buyer.
10.45
am
Q
8
Stephen
Hammond:
I understand why there were exclusions from the
normal regulatory regime during the construction phase. However, clause
2 is supposed to normalise arrangements and put all access on the same
basis. I do not understand why it is therefore appropriate for the
Secretary of State, rather than the Office of the Rail Regulator, to
exercise those powers? That would be different from normal
arrangements.
Mr.
Harris:
It is different from the rest of the rail
network. We look on High Speed 1 as an exception to the rest of the
network. Unlike for the rest of the network, which is essentially a
Victorian legacy, we know exactly what HS1’s cost base is; it is
not an unknown quantity. For the rest of the network, there is a
provision in existing legislation for five-yearly reviews of access
charges. That would not be necessary with HS1 simply because it is a
new asset.
As far as
the regulation of the rest of the network goes, the Office of the Rail
Regulator’s primary role is to determine those five-yearly
access charge reviews. That is not something that we want to apply to
HS1, simply because it is a brand new asset. In that respect, we can
justifiably say that it is a separate case. The ORR will retain some
regulatory functions as far as HS1 goes, but the arrangements are
different from those covering the rest of the
network.
Q
9
Stephen
Hammond:
I am grateful for that answer, but there
are two points that I would like to return to. First, my understanding
of clause 2 was that it was supposed to ensure that arrangements across
the network were as one. That clearly is not what is going to happen.
Secondly, on a five-yearly view, assets will depreciate and move in
value. Is it not appropriate for there to be a review of the cost of an
asset base, even after five years?
Mr.
Harris:
It is my view that there should not be a
review of an asset base over a short period of time like
that—not for a brand-new railway. As I say, the rest of the
railway is a different beast, given its age. We believe that HS1,
because it is a brand-new asset, should be treated completely
differently. We do not anticipate a need for access charge review every
five years.
Q
10
Chris
Mole (Ipswich) (Lab): You have explained why you think
that it is preferable for you carry out the function rather than the
regulator, in terms of managing access contracts. How will you, or the
Secretary of State, determine the access rights of those operators that
want to run services on HS1?
Mr.
Harris:
There is the development agreement. It would
be up to whoever was the owner of HS1 and the train operators to agree
on the terms of any access contracts. Under the terms of the
development agreement that I have just mentioned between the Secretary
of State and London and Continental Railways, those access contracts
would be subject to oversight by the Secretary of
State.
Returning to Mr.
Hammond’s question, the ORR would have an important role to play
in determining any dispute that might arise between the owner of HS1
and any operator. If they could not come to an agreement under the
Secretary of State’s guidance, the ORR would sit in appeal on
any disagreement, so it would have an important function in that
respect.
Q
11
Chris
Mole:
Does that really tell me exactly what the Secretary
of State’s role is, rather than the role of the ORR? Or are you
saying that the ORR will provide a supporting role to the Secretary of
State by arbitrating on those sorts of
disputes?
Mr.
Harris:
The Secretary of State has a duty to
arbitrate and to ensure that under any access contract between an
operator and the owner of HS1, they abide by the development agreement,
which is a historical agreement. It is the Secretary of State’s
responsibility to ensure that contractors remain within those
terms.
Q
12
Chris
Mole:
Moving on to conditions of access, what conditions
will be imposed on operators that are granted access to High Speed 1?
For instance, will it be possible to require services to stop at
particular
stations?
Mr.
Harris:
I do not see it as being the job of the
Secretary of State to tell international services to stop at particular
stations. However, when it comes to domestic services using HS1, that
will be part of the franchise agreement. There will be a service level
commitment providing for a minimum level of service at
stations.
Q
13
Susan
Kramer:
As the Minister will know, there is a great deal
of concern in the industry that the legislation as it stands, and as
changed by this Bill, will still make it exceedingly difficult for new
operators to provide international services. I think that we can say
that the taxpayer has contributed very substantially to the creation of
this asset. Obviously, the Secretary of State wants an environment that
means that the asset can be sold fairly attractively to get a good
return to the Treasury on the money that has been put in, but can I
suggest that the taxpayer at large also wants to see the maximum
opportunity for running new services to continental Europe? Can the
Minister give us some comfort that the changes that he is proposing,
combined with the existing regime, will create an environment in which
it is realistically reasonable for new operators to be able to come in
and provide those services, and that we are going to see the maximum
and optimal use of the asset? That uncertainty remains, despite the
language on the
page.
Mr.
Harris:
I think that those are valid concerns. Let us
look at the picture of open access, first as it relates to the domestic
network. Open access operators—those that are not provided for
through a domestic
franchise—are provided for in EU regulations, not through this
Bill or our own domestic railway legislation. When we have had
successful applications for open access operators, most recently for
the Wrexham-Marylebone service that has been given the go-ahead by the
ORR, that is provided for on the basis of, first, EU legislation and,
secondly, ORR’s assessment of whether there is enough capacity
on a particular route. In the case of the Wrexham line, it concluded
that there was enough capacity. There are many other main lines on
which there is not an awful lot of spare
capacity.
There is a
lot of spare capacity on HS1. Some 40 per cent. of the paths on HS1 are
being reserved for domestic services and, as I said, that will be taken
care of by a domestic franchise agreement. Eurostar is not using the
full quota of available paths for international services. I very much
hope that international operators will apply for open access to HS1 at
an early stage. We cannot provide for that because open access is a
matter for Europe—as it should be, given that these are
international services. However, I would be very surprised if
international operators did not take advantage of the fact that HS1 is
there, and that train paths are
available.
Q
14
Susan
Kramer:
The Minister is saying that market forces will
deal with this, but as I and others have pointed out to him, the way in
which the assets are to be sold would allow for cross-ownership between
the owner of the track and the owner of Eurostar, creating, some might
believe, a disincentive for open access for certain kinds of services
that would be highly competitive in various ways to the Eurostar
service. The body that has always held the ring, if you like, in
disputes of this kind has been the Office of the Rail Regulator, which
has now essentially moved to a position of last resort in terms of
regulating access. I am looking for him to give us some comfort.
Because cross-ownership of both the track and Eurostar is very
likely—SNCF currently has such cross-ownership—I am
extremely concerned that we do not put an institutional arrangement in
place that leaves everybody helpless in the face of that kind of
economic pressure. The answer that market forces will deal with the
matter leaves me with some
concern.
Mr.
Harris:
I have some faith in market forces, but I
have more faith in the fact that European regulations insist on a
separation of track and operator. I see that David is desperate to come
in on that point. If the Secretary of State is the overseer, or
regulator, of the access agreement, I do not foresee any circumstances
in which any Secretary of State would want to restrict international
access to HS1. I just cannot see how that would, politically, be a
reasonable position for any Secretary of State to
take.
David
Lunn:
The regulations require the separation of
management and accounts, and transparency in how the process works. We
would expect that to be taken forward. We do not necessarily think that
there will be cross-ownership; we think that separate ownership is much
more likely than joint ownership.
Q
15
Susan
Kramer:
One last question. I still have my reservations,
and while there is hope that there will not be cross-ownership, that is
not the word on the street.
Obviously there is the potential for HS2 and there have been discussions
about that. For example, people are putting together project notions
for spurs to Heathrow. There is a whole variety of potential linking
routes to HS1. How does the regulatory scheme that the clause puts in
place either enable or create issues for linkage into further
extensions at high
speed?
Mr.
Harris:
To be honest, I am unaware of any negative or
positive implications that the Bill will have for any future Government
who decide to progress HS2. I am happy for David or Graham to clarify
that.
On how access
might be regulated in the event of a conflict between owner and
operator, although she expresses some scepticism about how the free
market will operate in that respect, since it is not predicted that
Eurostar will use all the pathways available, it would be a profoundly
uncommercial stance for any owner of HS1 to cut off their nose to spite
their face—as they say in Scotland—and prevent more
revenue coming to their coffers by denying other international
operators access to HS1. There would be no commercial sense in doing so
unless Eurostar wanted to take those paths, and at the moment there is
no prospect of that
happening.
Q
16
Mr.
Adam Holloway (Gravesham) (Con): Can the Government trade
stakeholders’ shares, and what would be the rough value of
that?
Mr.
Harris:
If the Committee will forgive me, for obvious
reasons I will not speculate in advance on the values of a sale. We do
not want to pre-empt any decision of the open market about exactly what
the share value would be. I do not know whether David wants to come in
on the Government’s
side.
David
Lunn:
Could you repeat the
question?
Q
17
Mr.
Holloway:
Can the stakeholders’ share be sold by
the Government at some time in the future, or is it just a share of the
cash flow after
2020?
David
Lunn:
The Government share in future revenues? The
special shareholding in
LCR?
David
Lunn:
That special shareholding does not itself
retain economic value, although it does give rights to certain cash
flows going
forward.
David
Lunn:
It is not of that kind. I think that the wider
issue is that the debt is guaranteed. The Government underpin the
company, so it would be expected that the Government would receive
value from any sale. That is certainly the way that we are going
forward.
Q
19
Mr.
Horam:
There are no domestic services at the moment on the
line. What is the timetable for franchising domestic services on the
line?
Mr.
Harris:
Domestic services will begin in December
2009.
Graham
Dalton:
They are part of the franchise that has been
let to Govia, which is running the south-eastern services now. It is
commissioning the trains,
which are starting to be delivered, and it is obliged to start services
by December 2009. Govia may start earlier, should it wish to do so and
should it have a commercial case for doing
so.
11
am
Q
20
Mr.
Horam:
If the Eurostar plus the new domestic services
operate, that will presumably take a small part only of the capacity of
the new line. Will there be a lot of capacity left for other new
services?
Graham
Dalton:
There is capacity left. As the Minister said,
about 40 per cent. of capacity is used by the domestic services, so
there is capacity left, but not huge
amounts.
Graham
Dalton:
It is Govia’s intention to run pretty
well up to its full amount, from the early stages. We must remember
that it bid in competition to win the franchise and it is now
incentivised to go and sell seats and tickets on those
trains.
The
Chairman:
Are there any more questions on access? In that
case, we move on to clause 3, on the duties of the Office of the Rail
Regulator.
Q
21
Barry
Gardiner (Brent, North) (Lab): What is said in section
21(1) of the 1996 Act about the development
agreement?
Mr.
Harris:
Section 21 is
entitled:
“Duties
as to exercise of regulatory
functions”.
Would you
like me to read out two short
paragraphs?
Barry
Gardiner:
It is subsection 1 that I am interested in, in
relation to the development
agreement.
Mr.
Harris:
Section 21(1) states:
“The Rail Regulator
shall have an overriding duty to exercise his regulatory functions in
such a manner as not to impede the performance of any development
agreement.”
Q
22
Barry
Gardiner:
So how might the Office of the Rail
Regulator’s regulatory functions have an adverse impact on the
development agreement, in relation to the national
railway?
Mr.
Harris:
Well, for example, if a train operator wanted
to start running competing international services to those on High
Speed 1 using the main domestic rail network, that raises an issue
about the ORR’s role.
David
Lunn:
That is something that the ORR would then need
to take into account.
Mr.
Harris:
If a train operator wanted to start running
competing international services on the domestic network—not the
High Speed 1—to rival HS1 services, that would have a commercial
impact on international services running on HS1. However, the ORR would
have responsibility for that access agreement because the service would
be running on the Network Rail network, not HS1. That is a hypothetical
example.
Q
24
Barry
Gardiner:
So why should the rail regulator give overriding
precedence to the development agreement in this
situation?
Mr.
Harris:
We think that the ORR should have regard to
the commercial viability of HS1. In that specific circumstance, the
domestic network is there not to provide international services but for
the purpose of securing the long-term economic stability, growth and
prosperity of HS1. I do not want to see the ORR using its powers in any
way that might undermine that stability in the long term. If you like,
I accept that HS1 is being given preferential treatment over the rest
of the network in that respect.
Q
25
Stephen
Hammond:
The clause, as I understand it, allows the ORR to
charge CTRL a fee. The phrase that it uses makes reference to
“costs reasonably incurred”. Will you provide some
explanation or guidance as to what “costs reasonably
incurred” might be, in terms of comparison to other arrangements
that might
exist?
Mr.
Harris:
The arrangements that currently exist
between, for example, the ORR and Network Rail with regard to its
regulatory functions on the rest of the network are predictable. They
are set out in regulations and are accumulated to the ORR over a
five-year control period. The expectations of what the ORR does in
those circumstances are set in stone. They are agreed by the industry
and the
Government.
The
ORR’s responsibilities for High Speed 1 would be on an ad hoc
basis. I am referring to matters that are separate from safety
regulation. We are talking about when the ORR may have a role to play
in deciding an appeal from an operator who has a disagreement with the
High Speed 1 owner about access charges. The reason why that cannot be
done in the same way as ORR deals with Network Rail is that the
circumstances may never arise with High Speed 1. If they do, there is
no prediction when they will arise, which is why any payments have to
be made on an ad hoc basis rather than on a systematic predictable
basis. I do not know whether Mr. Hammond was looking for an
actual figure. That is slightly more
problematic.
Q
26
Stephen
Hammond:
I have two things to say. We discussed
previously in Committee the use of “reasonable”. I was
really looking for an explanation of how you intend to define
“reasonably” this time
round.
I hear what you
have just said about the position not being similar to the position
under Network Rail and therefore on an ad hoc basis, but the
explanatory notes say something entirely different. They say that it is
proposed to be in a similar position to Network Rail. Why is there a
contradiction?
Mr.
Harris:
It is a similar position, but only in respect
of the amount that would be charged. It is completely different in
respect of when the charges would be levied because the ORR is
providing an ad hoc service. It is not a constant or regular service
that will be provided on that occasion. It would arise only in the
event of a conflict. As for the structure of the
fees,
I am sure that my officials will clarify the position, but that is the
only resemblance to the fees of Network
Rail.
I am sorry, but
what was your first
point?
Q
27
Stephen
Hammond:
I did not want an actual figure from you. I was
looking for a definition, given that we have discussed the matter
several times. What should we take “reasonably” to mean
in this
context?
Mr.
Harris:
Whatever the legislation, my understanding is
that, if we express an expectation under the Bill that the fees charged
are reasonably incurred, that is something that can be challenged in
court and judicially reviewed. It would be quite robust in terms of the
ORR’s
role.
David
Lunn:
I do not know whether there is much more to
add. I think that the impact assessment quotes a figure of
£600,000. That figure would have come from a case of an appeal
held on the Network Rail network, which is an equivalent situation to
what might happen on CTRL. That is probably the reason for the
reference to Network Rail. Obviously, it is only a small part of the
regulator’s role on the mainline
railway.
Q
28
Mr.
Knight:
Do you not concede that the clause is very widely
drawn? My hon. Friend the Member for Wimbledon was being generous when
he said that it allows costs that are reasonably incurred to be
charged. The clause does not actually say that. It is not an objective
test; it is a subjective test. It deals with costs that the Office of
Rail Regulation considers to be “reasonably incurred”,
not necessarily what a reasonable man considers to be reasonably
incurred. Do you think that that is far too
wide?
Mr.
Harris:
May I correct the hon. Gentleman? He is right
to say that proposed subsection (2)(b) refers to what
“the Office of Rail Regulation
considers it reasonable for the rail link undertaker to
pay”
but subsection
(2)(a) refers to
what
“the Office of Rail
Regulation considers to represent the costs reasonably
incurred”.
Mr.
Knight:
Yes, but my point is that the wording of
subsection (2) (a), which is what I alluded to, does not say,
“such amount must be costs which are only reasonably
incurred.” It states that the amount of a fee shall
be
“such amount as the
Office of Rail Regulation considers to represent the costs reasonably
incurred by
it”.
The
Office of Rail Regulation may run a very slack ship with high
costs.
Mr.
Harris:
A lot of these costs are already prestated in
existing rail structures. As I have said, it would be entirely open for
any party to a dispute to raise concerns about any level of fee that
the ORR was charging and ask for that to be judicially reviewed if the
wording remains as it is. I am not aware of similar wording in any
other piece of legislation being particularly too widely drawn or too
controversial. I do not anticipate that this will be a cause of concern
among operators or infrastructure owners.
Q
29
Mr.
Knight:
May I move on to subsection (6) of this clause?
There are no limits on the scope of the ORR. Could not the following
scenario arise? A notice
is issued and the amount stated in the notice is not paid, so the ORR
then decides under subsection (6) to issue a second notice, adding
interest on to the fee, which was mentioned in the first notice. That
is not paid, so the ORR issues a third notice, adding the
lawyers’ fees as well on the basis that these are costs that the
ORR feels are reasonably incurred. Could we not get a succession of
notices bumping up the price for those who pay
late?
Mr.
Harris:
Well, we are all used to having to pay extra
for bills that are paid late. In this particular circumstance, any
extra cost would have to be reasonably incurred and may have to be
defended at judicial review.
Mr.
Harris:
Yes.
Q
31
Stephen
Hammond:
Could you confirm that the definition of rail
services includes the rail infrastructure, which means the track, the
stations, the depot, the rolling stock and any railway services such as
passenger and freight services and maintenance? Is the term
“rail services” that widely
drawn?
Mr.
Harris:
It is about the operation of
the railway infrastructure of HS1 itself and not the actual operation
of passenger or freight services.
Q
32
Stephen
Hammond:
Do you not concede that if you look at section 6
of the 2005 Act, it provides the definition that I have just given you,
which is more widely drawn than you have stated to us.
Mr.
Harris:
I am sure that you are right, but for the
purposes of this particular piece of legislation, it is intended to
refer only to
HS1.
Q
33
Stephen
Hammond:
Can we be clear, therefore, how we need to amend
this clause to ensure that that actually happens because that is not
what it says at the
moment?
Mr.
Harris:
I wonder whether I could ask my officials for
further information for the Committee stage, and then I will come back
to the hon.
Gentleman.
Graham
Dalton:
The development agreement was
specifically about the design and construction of the
railway.
Mr.
Harris:
Yes, but as I understand it, this clause
extends the definition of the development agreement to the operational
phase as
well.
David
Lunn:
I think that the existing development agreement
covers the operational phase of the railway. I think that this is just
about clarifying what the development agreement
covers.
Mr.
Harris:
I wonder whether we are arguing at
cross-purposes here. The development agreement originally covered the
period of construction of HS1. It will now cover the period of
operation. It is really about which time period we are talking about,
rather
than what is happening on HS1. Those are the two differences; one that
we were building it and now we are actually running
it.
Q
34
Stephen
Hammond:
I understand that point, and this is exactly the
same point as the interim latest period that we discussed in another
Committee last week. However, it is not only the time period, it is
also what you run during that period. That is what I want to be clear
about.
Mr.
Harris:
OK. I might have to get clarification on
that.
Any further
questions?
In that
case, can I thank you, Minister, for coming here today, and also
Mr. Lunn and Mr. Dalton for giving evidence. We
will now suspend the Committee for 15 minutes until 11.30 to enable us
to move to Committee Room 12, where we will resume. I ask hon. Members
to take their papers with
them.
11.15
am
Sitting
suspended.
11.30
am
On
resuming—
The
Chairman:
We are now back on more familiar territory and
we begin clause by clause scrutiny of the
Bill.
Clause 1Powers
of Secretary of
State
‘(3) In subsection
(1) “railway services” refer only to those services that
both originate and terminate in the United
Kingdom.’.
It
is an honour and privilege to serve under your chairmanship,
Mr. Atkinson. I am sure that you and other members of the
Committee will be relieved to hear that I do not intend to use words
such as “consultation”, “arbitration” or
“registered delivery”. Those who were in this room last
week will understand the significance of that remark.
The Bill is small. In many
ways, this is an exercise in refining the Railways Acts of 1993 and
2005, and the Channel Tunnel Rail Link Act 1996. We support that
premise because it is important that the new high speed rail link is
given the statutory support that it needs so that it can be the success
we hope it will be and in order for it to achieve its value.
Clause 1 attempts to clear up
possible confusion about whether the Government may continue to provide
financial support to the rail link, and the services running on it, now
that the construction phase is completed and the services are being
phased in.
As we have heard from the Minister, that is deemed necessary for the
avoidance of doubt in case of any future purchase or re-financing of
the rail link. My fear is that the current wording does not confine
that financial assistance to domestic
services.
The
explanatory notes
say:
“the Secretary of
State will also provide revenue funding for domestic services operating
on the CTRL under a
franchise.”
That was
presumably the intention. However, it is not the intention to provide
that funding for the Eurostar international services. The Bill
states:
“nothing in
sections 31 to 33 of the 1996 Act prevents the powers of the Secretary
of State under section 6 of the Railways Act 2005 (c. 14) from being
exercised in relation to the rail link or railway services on
it.”
I contend that if we
leave the phrase
“or
railway services on
it”
unamended, funding
will not be restricted to domestic services. Therefore, in the spirit
of helping the Government to remove any ambivalence or query, I contend
that the amendment would clarify the matter and make clear that the
railway services on the rail link that would potentially attract such
support are only those services that originate and terminate in the
United Kingdom.
Will
the Minister confirm that it was his intention to provide financial
assistance only to domestic services? If that is the case, I hope that
he agrees that my amendment is the appropriate way of enshrining that
in the Bill.
Mr.
Harris:
I also welcome you to the Chair, Mr.
Atkinson, and apologise for not having done so earlier. We are all
treading in new territory at the moment, and I am not sure when there
would have been an earlier opportunity.
The hon. Member for Wimbledon
always tries to be helpful. I can tell when he is doing so because he
says that he is trying to be helpful. However, as in this particular
case, it never quite works out that way. I understand the sentiment
behind the amendment, and I sympathise with his intentions and the
commercial principle that he promotes. It would be wrong for the UK
taxpayer to subsidise services across the continent. Members of the
Committee might take comfort in the fact that the Secretary of State
would not have the power to do so, even if she wanted to. The power to
support services under the 2005 Act extends to Great Britain
only—not to France, Belgium, or anywhere else where a commercial
operator might wish to run services.
Eurostar is a joint venture.
Its present structure is supported by a set of cost and revenue-sharing
protocols among the three partner companies in the UK, France and
Belgium. Under those agreements, Eurostar UK Ltd—the UK partner
owned by London and Continental Railways—pays only the access
charges on the UK side, and half of the charges for the tunnel itself.
Any restructuring of the joint venture would also have to be on terms
that protected taxpayers’ interests.
The amendment would rule out
leaving in place some of the historical support that the Government
have already agreed to provide to Eurostar UK Ltd, such as the access
charge loan and the guarantees of its rolling stock places. An
objective for next year’s restructuring is to make Eurostar and
all LCR’s businesses independent, self-standing and financially
sustainable. The Government and LCR should be in a position in which a
full range of options is available to meet that objective so that
decisions taken best protect the taxpayers’
interests.
The hon.
Gentleman is right in that the Government’s intention behind the
clause is to allow continued subsidy or support for domestic services,
not international services. I said on Second
Reading:
“It
does not mean that the Government have any long-term intention to offer
public subsidy to Eurostar.”—[Official Report, 20
November 2007; Vol. 467, c. 1156.]
With that reassurance, I hope that he
will withdraw the
amendment.
Stephen
Hammond:
Before I consider that, may I press the Minister
on two things that he said in his explanation? First, he said that
there is no power in the 2005 Act for the Secretary of State to
subsidise services across the continent. I understand that point.
However, in extremis, does not the Bill allow the possibility of part
of the service that Eurostar is running in the UK being open to revenue
funding? Is that really what the Government intend to
do?
Secondly, I fail
to understand how my amendment could possibly have an impact on the
guarantees that were previously given on access and rolling stock. Will
the Minister clarify why he thinks that it would in any way affect
those?
Mr.
Harris:
On the hon. Gentleman’s second point, I
think that it is quite feasible that if we were to amend the Bill in
the way in which he suggests so that it said that international
services were precluded from any such public subsidy of any shape or
form, any existing financial agreements, such as rolling stock leases,
could clearly be challengeable in court.
On the first point—will
the hon. Gentleman remind me what his first point
was?
Stephen
Hammond:
My first point was that the Minister rightly
stated—we all understand this—that the intention was to
provide financial assistance for revenue operations, potentially
regarding the domestic service only. He said that there was nothing in
the 2005 Act that would allow the Secretary of State to subsidise
services operating on the continent. However, I am saying that if the
Bill is not amended, there might be a position in which it will be
possible for her to subsidise the UK portion of Eurostar’s
operations. Is that really what the Government intend to
do?
In
essence, if, in the short term, any extra subsidy were to be provided
to Eurostar Ltd, such as through the leasing stock agreements, the hon.
Gentleman is right. That could be interpreted as being a short-term
subsidy from the Government. However, as I have said repeatedly, it is
not the intention of the Government publicly to provide any subsidy to
Eurostar in the long term. However, there will be an interim period
following the restructuring of LCR in which there will be a necessity
for perceived public funds to be available to Eurostar, but it will be
only a short period. Certainly, in the long term, we do not expect
Eurostar to be publicly funded; we expect it to be a viable commercial
operation that stands on its own two feet. The hon. Gentleman’s
amendment would preclude us from offering even short-term support in
whatever form, such as through subsidy or leasing stock
agreements.
Stephen
Hammond:
I have listened carefully to what the Minister
has said. If he had wanted such a provision, as we have seen from other
pieces of legislation that we have examined, he could have done so
though the use of an interim period clause. I accept that the
Government intend to concentrate revenue funding on domestic services.
However, I shall examine carefully why the Minister thinks that the
measure has an impact on matters such as the leasing arrangements for
Eurostar because it seems to tackle the operation of domestic services.
We might revisit that on Report. I beg to ask leave to withdraw the
amendment.
Amendment, by leave,
withdrawn.
Clause
1 ordered to stand part of the
Bill.
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