High Speed Rail (Preparation) Bill


The Committee consisted of the following Members:

Chairs: Annette Brooke  , † Jim Sheridan 

Burns, Mr Simon (Minister of State, Department for Transport)  

Dakin, Nic (Scunthorpe) (Lab) 

Dobson, Frank (Holborn and St Pancras) (Lab) 

Glass, Pat (North West Durham) (Lab) 

Greenwood, Lilian (Nottingham South) (Lab) 

Hopkins, Kris (Keighley) (Con) 

Lumley, Karen (Redditch) (Con) 

Mahmood, Mr Khalid (Birmingham, Perry Barr) (Lab) 

Morgan, Nicky (Loughborough) (Con) 

Morrice, Graeme (Livingston) (Lab) 

Reid, Mr Alan (Argyll and Bute) (LD) 

Shannon, Jim (Strangford) (DUP) 

Spelman, Mrs Caroline (Meriden) (Con) 

Stewart, Iain (Milton Keynes South) (Con) 

Sturdy, Julian (York Outer) (Con) 

Vickers, Martin (Cleethorpes) (Con) 

Neil Caulfield, Committee Clerk

† attended the Committee

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Public Bill Committee 

Thursday 18 July 2013  

(Morning)  

[Jim Sheridan in the Chair] 

High Speed Rail (Preparation) Bill

Clause 2 

Financial reports 

11.30 am 

Amendment proposed: 21, in clause 2, page 2, line 3, at end insert— 

‘(1A) The Secretary of State shall make a statement to the House of Commons should agreed yearly budgets be exceeded, or should they be expected to be exceeded.’.—(Lilian Greenwood.)

Question put , That the amendment be made. 

The Committee divided: Ayes 5, Noes 8. 

Division No. 4 ]  

AYES

Dobson, rh Frank   

Glass, Pat   

Greenwood, Lilian   

Mahmood, Mr Khalid   

Morrice, Graeme (Livingston)    

NOES

Burns, rh Mr Simon   

Hopkins, Kris   

Lumley, Karen   

Morgan, Nicky   

Reid, Mr Alan   

Spelman, rh Mrs Caroline   

Stewart, Iain   

Vickers, Martin   

Question accordingly negatived.  

Frank Dobson (Holborn and St Pancras) (Lab):  I beg to move amendment 15, in clause 2, page 2, line 5, after ‘each’, insert ‘six months in each’. 

The Chair:  With this it will be convenient to discuss the following: 

Amendment 28, in clause 2, page 2, line 5, after ‘each’, insert ‘quarter of the’. 

Amendment 16, in clause 2, page 2, line 7, after ‘during’, insert ‘each six months in each’. 

Amendment 29, in clause 2, page 2, line 7, after ‘the’, insert ‘quarter of the’. 

Amendment 19, in clause 2, page 2, line 7, leave out ‘the’. 

Amendment 30, in clause 2, page 2, line 9, leave out ‘year’ and insert 

‘quarter, and that financial year when applicable’.

Amendment 31, in clause 2, page 2, line 10, leave out ‘in that year’. 

Amendment 34, in clause 2, page 2, line 11, after ‘1’, insert 

‘in that quarter, and in that financial year when applicable’.

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Amendment 20, in clause 2, page 2, line 12, after ‘means—’, insert— 

‘(a) in relation to the period from 1 April 2010 to the day on which this Act is passed, each successive year from 1 April 2010 to the day on which this Act is passed; thereafter.’.

Amendment 32, in clause 2, page 2, line 18, leave out ‘year’ and insert ‘quarter’. 

Amendment 18, in clause 2, page 2, line 19, leave out subsection (5). 

Amendment 33, in clause 2, page 2, line 19, leave out ‘year’ and insert ‘quarter’. 

Frank Dobson:  I hope that we will not delay you too long this morning, Mr Sheridan. The general thrust of the amendments, taken together, is that the present reporting proposals are ludicrous, in that no financial report will be presented to Parliament before April-May 2015. That would be the longest financial year in history. We think that there needs to be reporting long before then—the annual reports should come sooner—but also that there should be reports quarterly, because the sums being expended are not pocket money by any standards. 

As the permanent secretary at the Department for Transport told the Public Accounts Committee, his Department is spending £370 million this year alone. I do not know how much it has spent so far. Alison Munro from HS2 Ltd said that “To date”, HS2 had spent £234 million; that was up to the end of the last financial year. She did not go on to say what it would be spending this year, but it is reasonable to assume that the spending will be building up, not falling away. Those two sentences were talking about £600 million. I and my hon. Friend the Member for Nottingham South think that we need quarterly reporting, to say the least, to keep an eye on how this spending is going. 

There would be more willingness to allow the much-delayed reporting if there was any evidence that HS2 and the Department were getting the spending right. It is clear that they are not getting the spending right. They may be spending the money on the wrong things; they may be spending it on the wrong advice. But whatever it is, it is clearly poor work that is being done and it needs to be reported on. 

For instance, the overall cost of the works at Euston was originally estimated at £1.2 billion, but it was then estimated at £2 billion. That is £800 million more than the original estimate. The leader of Camden council and I met the people from HS2 Ltd, who told us that they would have to abandon the large-scale scheme for Euston, because they had underestimated the costs by 40% and they needed to reduce the costs by that much in order to get within budget. Yet when they appeared before the Public Accounts Committee, it turned out that that was not true. The revised and much reduced scheme will cost 40% more than the original estimate for the big scheme—£1.6 billion—so they are now spending a huge sum of money reviewing the figures. 

I find it remarkable that the HS2 people can come up with such allegedly firm forecasts, but have to admit that they have not done a feasibility study of the revised proposal. Presumably once they get the feasibility study done, there is every chance that the costs of the revised

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proposal will go up and, whether they go up, go down or move sideways, unless they stay exactly the same, the Department and HS2 Ltd will be spending yet more money correcting their original errors. We are talking about hundreds of millions of pounds. It is therefore imperative that such expenditure is reported quarterly, so that Parliament, which is supposed to look after taxpayers’ money, is looking after taxpayers’ money and seeing what happens to it. There is nothing party political about that—it is a House of Commons thing. We are here to keep an eye on public spending, but we are not keeping an eye on it. 

Public spending has been going on, but the information has had to be dragged out in various ways, and it was even denied for a long time. I would go further, and perhaps we will table some amendments to that effect on Report, but in view of the failure of a lot of the contracts with the consultants, the quarterly reports should specify all the contracts that have been let, what they have cost, what progress has been made and, where there is any means of assessment, whether the taxpayer, HS2 Ltd and the Department got value for money from the consultants that they have been using. 

As I said in an earlier sitting, I do not necessarily blame the people who are hiring the consultants. For a major civil engineering project, we go to people who are, by world renown, among the best civil engineering consultants; if they let us down, that is difficult, but I would not allocate blame to those who let the contracts— I might allocate blame if they then let another contract to the same consultants to correct what they had already got wrong. That is the burden of the points that I wish to make on this group of amendments. 

Lilian Greenwood (Nottingham South) (Lab):  I will speak to amendments 28 to 34, which stand in my name and would introduce a requirement for quarterly financial reporting. As set out by my right hon. Friend the Member for Holborn and St Pancras, we are concerned that, because the proposed arrangements only include a requirement for annual reporting, bad news could be stored up. 

As for the saying, “a week is a long time in politics”, well, the past year has certainly been a long time in the financing of High Speed 2. Even the last day might have felt like a long time. We welcome the publication of a yearly, full financial report as set out under the Bill. I should be interested in what the Minister has to say about the fact that we would like certain matters to be covered in that report, such as the cost of HS2 Ltd itself, which the Government have established as their vehicle for developing and delivering the project, and the jobs and apprenticeships that it will be create. We have tabled further amendments to cover both issues. 

The amendment would not change arrangements, but there would be a value in having supplementary reports, rather than only the annual report. Quarterly reporting is common practice in the private sector, and it would allow both Parliament and outside bodies to identify early an increase in costs. The rigour of requiring HS2 Ltd and the Department to compile those reports would assist in the internal identification of a concerning cost trend, so that things are picked up early and there is an opportunity to respond, rather than coming out at the end of the financial year by which time the damage will have been done. 

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The proposal could also ensure that work on the annual report is maintained on an even keel throughout the year. We all know the feeling when the deadline seems a long way off, and we leave matters until it gets closer. Instead of having an annual race to present the information in time, the amendment would ensure that the work is ongoing throughout the year. The Government have set out annual budgets through to 2020-21. We welcome that step towards the scrutiny of project spending. It enables to know what has been projected and what the outcome will be. That is especially important in the wake of the National Audit Office report. 

Such scrutiny should be a continual process. I am disappointed that the Government voted against our amendment 21. It was not attacking them or the Bill, but simply seeking to put more transparency into the process to ensure that Parliament has proper oversight of expenditure on what is an important strategic project that involves substantial sums of public money. We do not want to add to the administration costs of the project, which are already large, but want reassurance from the Minister that scrutiny will be for the life of the project and not just for the end of the financial year. We want to know that he is looking continuously at how it is progressing, keeping an eye on costs and ensuring value for money for the public purse. I hope that he will set out what options will be available to Parliament and the wider public so that they can scrutinise the project spend, when the Secretary of States is not compiling his annual final report. I look forward to his comments. 

Mr Khalid Mahmood (Birmingham, Perry Barr) (Lab):  As my right hon. Friend the Member for Holborn and St Pancras and my hon. Friend the Member for Nottingham South said, we need accountability. It is important. As the Minister saw last night on “Newsnight”, which he described as a programme very biased against HS2, the less exposure there is in that respect, the more difficult it will be for the project to be out in the open. People need assurance that there will be a handle on the finances of the project. It will add to the weight that the Minister will have to have to push through the project, and I agree with my hon. Friend the Member for Nottingham South on that. 

11.45 am 

The Minister of State, Department for Transport (Mr Simon Burns):  Let me say at the outset that I do not think that there is any difference between the desire of Opposition Members and that of my hon. and right hon. Friends. We are determined that there will be the greatest transparency and accountability on the spending of money. One show of our determination to do that is this Bill. It holds the Government to account within the framework of the legislation on the pre-building expenditure. 

I am not so keen, however, on the concept of six-monthly or quarterly reports instead of annual reports, because, for reasons that I will outline, that is not the best way forward. I reassure the hon. Member for Nottingham South and the right hon. Member for Holborn and St Pancras that although there will be an annual report each financial year, hon. Members will have a variety of other means between those financial reports to keep an eye on the project’s finances. They will be able to hold the Government, the Department for Transport and, in

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effect, High Speed 2 Ltd to account through parliamentary written questions, parliamentary oral questions and Adjournment debates. There are considerable opportunities for accountability. 

Frank Dobson:  Will the Minister give an undertaking that none of the approaches he has mentioned for seeking information will be turned away with the words “commercially confidential”? 

Mr Burns:  The right hon. Gentleman has been here long enough and is wise enough, particularly as a distinguished former Secretary of State for Health, to not in all reasonableness expect me to give that blanket assurance. The reason why I cannot give that commitment has nothing to do with transparency or accountability; it is because there are commercial sensitivities, particularly when dealing with commercial bodies entering into contracts to deliver a project, where it is just not possible to make the information available. What I can say is that we obviously do not want to hide anything. 

We want transparency and accountability. There are a number of parliamentary processes through which hon. Members can achieve them, but there is the added proposal of an annual report from the Secretary of State, which gives the safeguards and commitment that hon. Members want. The date of the first full report is determined by the fact that the Bill is expected to gain Royal Assent later this financial year. The first full financial year after that date will end March 2015. It is long-established accounting practice to report based on financial years, so that is how we will do it. We cannot see the advantage of creating a report that could only focus on a few months of the financial year 2013-14. To our mind, that does not seem viable. That is why I urge hon. Members to reject the amendment on the first report. 

Graeme Morrice (Livingston) (Lab):  The Minister mentioned that it would not be normal to consider something on anything other than a yearly basis, but this is not a normal project. It is massive, and I have seen big projects get out of control financially because there was not regular financial monitoring. Having a quarterly, rather than a yearly, report would allow for greater scrutiny and accountability. I accept that it is not normal to do that, but this is not a normal project. 

Mr Burns:  I agree with the hon. Gentleman in one respect: this is not a normal project. It is a very ambitious, exciting project that is in the national interest, but it is not unique in this country. There are other projects which have been exciting and badly needed by this country, including High Speed 1, the channel tunnel, the building of the motorway network, the Olympics, Crossrail, which is currently progressing, and terminal 5 at Heathrow. 

We are giving this project the additional safeguard of an annual report, so that we can allow people, both inside this House and way beyond it, to regularly monitor what is going on with regard to the finances and other activities associated with the project. Hon. Members will have the opportunity to raise the issue in this House

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in a variety of ways which I have already mentioned, which I think is a very valid, useful and important way for people to keep a close eye on the situation. 

Pat Glass (North West Durham) (Lab):  In a previous life I managed what are known as open-ended budgets, which include things such as looked-after children, special needs and so on. They are driven by demand but somebody still has to manage the budget. As the person responsible, I had those budgets across my desk every month. Presumably there is a civil servant within the Treasury or the Department for Transport who will be keeping a very close eye on these budgets, not annually but very regularly. Why can those reports not be made available to Parliament? In the end, we are swiftest when we are chased, and keeping an eye on the budget will be really important. 

Mr Burns:  I can certainly assure the hon. Lady that it will not be only a single civil servant who will keep an eye on the expenditure of this project on a daily basis. A number of civil servants and people at High Speed 2 and elsewhere will do that. We have very robust mechanisms in place to ensure that this project is tightly controlled, so that we do not come up against the problems of some previous projects where the finances got out of control. I hope the Committee will agree that it makes sense to have any new duty on annual reporting that we create with this Bill fit with our current financial reporting duties. That will ensure that we do not create unnecessary additional process or burdens in the Department and that each report is produced to a high degree of quality and accuracy. 

We feel that the annual reporting cycle provides the right frequency for reporting the expenditure that we plan to incur. That frequency will also align with the NAO’s new duty to report to the Public Accounts Committee on the value for money of the scheme. In our early discussions with the NAO, it felt that there would be scope to use this report as a basis for fulfilling its annual duty to the PAC. I will provide a commitment to the Committee that, outside of this duty that we look to create, I have asked officials to consider the potential for an interim report on the expenditure being made on High Speed 2 to be produced in advance of 2015. They are currently considering what could be produced in addition to the reporting duty. 

Frank Dobson:  I am grateful to the Minister for what he is suggesting, but I would like to get this clear. We are told that the first annual report following the Bill will be produced in April-May-June 2015, reporting on what is spent this year and what is spent in the next financial year. So it will cover two financial years, and there will be no guarantee of any report before then. The Minister has said, quite rightly, that the officials will be keeping a close eye on this, to say the least. He said that he does not want to produce interim reports because it might be difficult to produce accurate ones. One would hope— 

Mr Burns:  I did not say “accurate”. 

Frank Dobson:  I think the Minister did say it. He was concerned about the reports’ accuracy if they were more frequent. It seems to me that if monthly or daily

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scrutiny by civil servants is not accurate, that is exactly what we want to expose. If the work that they are doing is accurate, there is no reason at all why those figures could not be published every three months. I do not understand the problem. It would not be bureaucratic; people would just have to tap a button, it would go on a screen and we would be able to look at it or print it off. 

Mr Burns  rose—  

The Chair:  Order. I am conscious of the fact that interventions are getting a bit long. Rather than making speeches, keep interventions brief. 

Mr Burns:  Thank you, Mr Sheridan. May I explain something to the Committee so there is no misunderstanding? The annual reports are about expenditure that will be incurred under the Bill before us. The expenditure that will flow following the will of Parliament in passing the hybrid Bill will have to do with construction of the high-speed rail link. What we are talking about is an annual report to Parliament on the expenditure incurred by this Bill. The first report, as the right hon. Gentleman mentioned in his intervention, will be for the financial year 2014-15—up to the end of March or early April 2015—but will include a few months of the financial year 2013-14 after Royal Assent is given to this Bill. That will probably include January, February and March 2013. 

What I said just before the intervention is that some people have concerns about what will happen for the months when expenditure is incurred under the Bill after it becomes an Act in the financial year 2013-14. I have asked officials to consider the potential for an interim report on the expenditure being made on HS2 in advance of 2015. They are currently considering what could be produced in addition to the reporting duty. 

To return to my original point, the normal procedure is annual reports. I think that that is the right way forward, because of the extra opportunities that hon. Members have to hold the Government, the Department for Transport and HS2 Ltd to account through numerous mechanisms. Also, because we are determined to be transparent and accountable about all that is being done through High Speed 2, that is the right way forward without creating a system that is too cumbersome because reporting is too frequent. I believe that quarterly and half-yearly reports would be too frequent. 

Lilian Greenwood:  I want to clarify something. My understanding from reading the Bill is that the first annual report after the end of the financial year on 31 March 2015 will cover the whole period after this Bill receives Royal Assent. I believe that the budget for this Parliament is about £900 million. We are talking about a significant amount of public expenditure and a long period of time in which, as it stands, there will be no update to Parliament unless Members use the other parliamentary procedures to which the Minister referred. Would it not be helpful, particularly given the intense public scrutiny of this project, to put in place arrangements to make regular reports to Parliament on that expenditure of £900 million in this Parliament? 

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Mr Burns:  That is the very reason why we are putting a requirement in the Bill on the Secretary of State for Transport to produce an annual report. To the best of my knowledge, that is a new proposal: as far as I know, we have not had annual reports on any of the other major projects of the past 10 or 20 years. The reason why we are making that requirement is to provide the accountability and transparency that we are all united in wanting. 

12 noon 

The difference between the Government and the Opposition is that we plan to have reports on an annual basis, as that is, to our mind, the best way forward, whereas some of the amendments suggest quarterly reports and others suggest half-yearly reports. We believe either of those would be onerous and have only limited gains. 

Frank Dobson:  Until the Minister said so, I had not understood that the only thing to be reported on is money disbursed as a result of the Bill. What will be the machinery for reporting on the money being spent at the moment, up to the time that the Bill gets Royal Assent? We know that the pair of them are each spending hundreds millions of pounds but there is apparently no proposal to report that spending at all. 

Mr Burns:  That expenditure is reported in the annual accounts of the Department for Transport. It might be helpful to give the actual expenditure over the past few years and the forecasts for the current financial year and the next one, 2014-15, as that will put the amounts in context. The total actual spend of both the Department for Transport and High Speed 2 Ltd in 2009-10 was £9.5 million; in 2010-11 it was £24.3 million; in 2011-12 it was £55.6 million and in 2012-13 it was £214.6 million. The forecast for 2013-14 is £366.9 million; for 2014-15 it is £442.5 million. 

To conclude, I believe that an annual report, which is a new procedure for this sort of project, enhances transparency and accountability, and gives hon. Members and others beyond this House with a particular interest in the project the ability to monitor what is going on, question that when appropriate and hold the Government and HS2 to account. An annual report, something that is common in many other procedures on finance and financial information, is the right way forward. A quarterly or half-yearly report would be burdensome and onerous. For those reasons, I urge the Committee to reject the amendments should any of them be pressed to a Division. 

Mrs Caroline Spelman (Meriden) (Con):  The figures that the Minister just read out are global figures; what would interest the right hon. Member for Holborn and St Pancras and myself, given that we are the only two MPs on the Committee who will have the proposed railway going through our constituencies, is a bit more detail. Obviously, we could table a written question. I would be interested to know, as I mentioned on Tuesday in our lengthy debate on compensation, how much compensation is being disbursed. My difficulty as a constituency MP is slightly different from the right hon. Gentleman’s concerns about moving costs such as

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consultancy and the cost of the Euston project: I would like to know how much compensation is being disbursed so I know what is normal. 

Mr Burns:  I can help my right hon. Friend on that now. The spending on compensation to 1 July this year has been £51 million. I have other figures here, but it would detain the Committee too long if I broke them down into HS2 and the DFT. However, I would certainly make them available to both right hon. Members, if they would like them. 

Frank Dobson  indicated assent.  

Mrs Spelman  indicated assent.  

Mr Burns:  If the right hon. Members are interested in other information about the costs that have been incurred so far, they can write to me now, before we go into recess, and we will respond as soon as possible, or they may wish to wait and to table parliamentary questions so that they get an answer, albeit towards the back end of August or when we return in early September. Whichever way they would like to do it, we will obviously help with the information, in so far as we have it. 

Frank Dobson:  I find the Minister’s response unsatisfactory, partly because it has revealed to me something I had not realised—that a chunk of money, which the Department and HS2 will spend in the period up to the Bill’s becoming law, will not be reported on, except in some generalised reporting arrangement. That is rather disturbing, but I will not press the amendments in my name at the moment, although my hon. Friend the Member for Nottingham South may wish to press the ones on quarterly reporting . 

Lilian Greenwood  indicated dissent.  

Frank Dobson:  I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Mr Burns:  I beg to move amendment 37, in clause 2, page 2, line 8, at end insert 

‘(with capital and resource expenditure specified separately in respect of each head of expenditure referred to in section 1(4)(a) to (c))’.

The Chair:  With this it will be convenient to discuss the following: 

Amendment 17, in clause 2, page 2, line 11, at end add— 

‘(d) all expenditure in all Departments across Government on matters related to the high speed railway transport network.’.

Amendment 35, in clause 2, page 2, line 11, at end insert— 

‘(d) any tax incurred through expenditure under section 1, and any tax that has been reclaimed from the Treasury in the relevant reporting period.’.

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Amendment 36, in clause 2, page 2, line 11, at end insert— 

‘(d) the administration costs of the project’s delivery body’.

Amendment 38, in clause 2, page 2, line 11, at end add— 

‘(d) jobs and apprenticeships directly created in the relevant reporting period.’.

Mr Burns:  The amendment clarifies that the expenditure incurred under clauses 1(4)(a), (b) and (c) includes elements of capital and resource expenditure. In many ways, this is a technical amendment dealing with accounting processes, but I will briefly explain more about what is behind it. 

The Government will be required to report individual figures for the amounts incurred for capital and resource in each year on pre-construction activity, acquiring property and providing compensation in respect of property likely to be affected by HS2. Accounting practice is that appropriate expenditure may be treated as capital where it is probable that an asset will be realised as a result of it. There is a danger that the Bill, by bringing forward capital spending that would otherwise occur following Royal Assent for the relevant hybrid Bills, creates uncertainty about the appropriate accounting treatment. The amendment seeks to resolve that uncertainty by ensuring the report is clear about the accounting treatment used for different elements of expenditure. The accounting treatment of all expenditure will, of course, be in line with international accounting standards. 

Property acquisition will always have a significant element of capital spend, as the Government are purchasing a physical asset, but pre-construction activities require a more careful assessment of whether an asset will probably result. As the assessment of whether an item of pre-construction activity is capitalised depends principally on whether it is probable that an asset will be produced at the end of that activity, the approach we propose to take is to capitalise, if appropriate, following Second Reading of the relevant hybrid Bill. A successful Second Reading of the hybrid Bill will give us the confidence that it is possible a railway will result, so that is the correct time to capitalise. That is fully in line with international accounting practice. 

By being clear that we will provide details of resource and capital expenditure, we will provide complete transparency over accountancy treatment to enable Parliament, the National Audit Office and anyone else who wishes to do so to hold us properly to account. For those reasons I commend the amendments to the Committee. 

Lilian Greenwood:  Before the Minister finishes, may I clarify one point? Is he saying that it will not be possible to make this distinction between capital and resource spending before Second Reading of the hybrid Bill? 

Mr Burns:  I was saying that, until the hybrid Bill has passed, we will not definitely know what an asset may be. Once the first hybrid Bill is passed, we will know for certain, because parliamentary approval has been given, that phase 1 of the project will be being built. When Parliament passes the second hybrid Bill, we will then

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know that the project will move forward on phase 2. For those reasons, I urge hon. Members to support the amendment. 

Lilian Greenwood:  I wish to speak in relation to Government amendment 37 and in support of amendments 35, 36 and 38. I welcome the new requirement to report separately capital and resource expenditure. The Minister has set out an explanation for why that has been put forward, which is helpful so we welcome its inclusion in the Bill. I am not sure that I quite understood the clarification the Minister just gave in relation to my question and whether it will be possible to make the distinction at the time of the first financial report. I am assuming that we will have passed the hybrid Bill by the end of March 2015. 

We have introduced amendment 35, because there are question marks over whether HS2 Ltd will have to pay value added tax. If it is liable for VAT, that could boost the headline cost of spending by 20%, even though that spending would effectively represent a transfer of funds from the Department for Transport to the Treasury. The National Audit Office picked that up in its recent report when it said: 

“HS2 Limited is likely to have to pay VAT, which it may not be able to reclaim.” 

The Department has not included VAT in its published construction cost estimate. Public perception of how well the Department manages the High Speed 2 programme may be adversely affected if the estimate is increased to include VAT, even though that represents an internal transfer within Government rather than an additional cost. 

Given the public scrutiny that has been placed on this project—we have seen this particularly in the media in recent days and weeks—the National Audit Office is absolutely correct. If the cost suddenly goes up by 20%, even though it is an internal transfer because HS2 Ltd has to pay VAT which goes to another part of Government, it will lead to yet more questions being asked that could be avoided. The issue needs clarification. I do not know whether the Minister is in a position to state today whether or not HS2 Ltd will be liable to pay VAT. If he cannot clarify the matter at this stage, will he accept our amendment, as there is a public interest in providing that information? As the National Audit Office pointed out, there is also a huge question around public perception. 

The Minister said last week that we do need to do more to make the case for this project. I agree that more needs to be done to set out why the project is needed and what benefits it will bring to the whole country. Clarity on its tax status would help us to make that case. 

If HS2 Ltd incurs VAT, the Treasury would allocate money to the Department for Transport, which would give it to HS2 Ltd, which would then hand 20% of the original funding back to the Treasury. Clearly, that would be inconvenient for everyone involved and could add to the back-office costs of funding the project. Ministers should be taking action to resolve the matter. If the matter cannot be adequately resolved because of the status of HS2 Ltd as a separate arm’s length body, perhaps we should consider an alternative body to deliver the project. 

The National Audit Office called on the Department for Transport to clarify the VAT position for the programme with HS2 Ltd and Her Majesty’s Revenue and Customs.

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Our amendment was partly designed to secure that clarification from the Minister. We also think it would be valuable if that information could form part of the annual financial report that we have just discussed. 

12.15 pm 

The general purpose behind amendment 36 is that the Government’s financial report should contain information about the administrative costs of delivering the project. We also have some concerns about the role of HS2 Ltd that were raised in relation to VAT liability. 

The present wording of the Bill requires the Secretary of State only to prepare a report containing details of expenditure under section 1. We think it is unclear what the word “details” would extend to. That is why we seek to insert a little more clarity. Perhaps the Minister can provide a full breakdown of spending areas to be included in the financial reports, and whether that would include and specify the administration costs of delivering the project. 

We have worded the amendment in general terms, instead of referring to HS2 Ltd, because we believe that there are questions about whether HS2 Ltd is the right body to see the project through to delivery. We have already raised the question around tax and whether the set-up of HS2 Ltd makes that more difficult. We also heard complaints last week during the evidence sessions, particularly from local authorities and businesses along phase 1 of the line, about a lack of clear information and engagement on a number of issues. That impression was reinforced by the High Court judgment on the initial consultation around compensation. 

We owe it to ourselves to consider whether we should spend money on potentially duplicate bureaucracies in the Department for Transport and HS2 Ltd. We know that £20 million will be spent on HS2 Ltd’s administration costs over the course of this Parliament, with substantially more spent on the cost of accommodation. We should ask whether those current arrangements represent the most cost-effective way to channel our public funds, and ask for detailed scrutiny of HS2 Ltd’s administration costs. For those reasons, though subject to the Minister’s reply, we would seek to press the amendment to a vote. 

We have tabled amendment 38 because we believe that jobs and skills are a key part of the case for a new north-south rail line. We heard evidence last week from a number of local authorities and representatives of businesses, as well as from academics, about the direct and indirect job creation benefits. We accept that it would be difficult to measure the indirect job creation, so we have not sought to include that in the amendment. However, we do think direct job creation figures should be part of the annual report—both temporary construction jobs and permanent ones. We would also like to see a clearer policy on apprenticeships. Putting that requirement in the Bill would be a powerful spur to setting out such a policy. 

In evidence last week we heard from the chair of Crossrail that, by imposing a contractual obligation on suppliers, it has been able to create a significant number of apprenticeships and training opportunities, and it has set up a new training academy. I think it was due to create 400 apprenticeships, was well on the way and expects to achieve that target by the end of the project. 

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That commitment was crucial, not just for the success of Crossrail but the future of major railway construction work in the UK. We should seek to learn from the things that work and to build on them. Terry Morgan gave evidence regarding the tunnelling academy and the future things that it might do, and obviously High Speed 2 may be one of them. We would like to see an arrangement similar to that for Crossrail in place for HS2. 

The issue also came up in the past week. When the chief executive of HS2 gave evidence to us, she provided the reassurance that the organisation is trying to learn from Crossrail and already has four apprentices. That is good news in as far as it goes, but we want to see a proper strategy for delivering jobs and skills. Yesterday, the Secretary of State said that 700 apprentices and graduate trainees are working on the project. I should be grateful for an explanation from the Minister of how that figure breaks down, if there are only four apprentices at HS2 Ltd. I understand that there are a number of suppliers and contracting organisations. Perhaps he will be able to provide some clarity. 

The Committee heard that a jobs and skills strategy was being developed. In that case, it would make sense to report on the strategy’s progress, as our amendment would require. The jobs and skills strategy should also look at how communities most affected by the line, such as Camden, can benefit from jobs and training opportunities. Seeing some direct benefit is important to communities, particularly to those that will experience a great deal of disruption. 

One of the reasons for Crossrail’s success in the area was its decision to link the number of apprenticeships generated with the amount spent on the project. I have seen that operating in a similar way in my constituency in other infrastructure projects, albeit not related to railways. Crossrail settled on the ratio of one apprenticeship or the hiring of someone currently out of work for every £3 million spent. We think that HS2 Ltd could go further and have one apprenticeship for every £1 million spent, as the Leader of the Opposition has argued for. 

Jobs and apprenticeships are a key part of the case for the project, and Ministers have an obligation to make that case to the public. The public will see those jobs, apprenticeships and training opportunities, particularly for our young people and those who have been out of the labour market for a long time, and understand why the project is important. They will be much more accepting of the expenditure if they see the wider benefits for our economy and for people in their area or town, and not necessarily just for those along the line. It enables us to demonstrate clearly that the project is for the whole country, not just for those who are close to the line or the stops. 

Frank Dobson:  I rise in support of my hon. Friend’s amendments. I do not intend to bore people by repetition, so that leaves only amendment 17. 

The object of amendment 17 is for the report to include all expenditure incurred by any Department on the furthering of the project, so that we get a genuine, full, global total of what the scheme costs. For instance, the Department for Business, Innovation and Skills might be involved in one way or another, because of its relationship with industry and potential suppliers of

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rolling stock. It is certainly likely that the Department for Environment, Food and Rural Affairs will have to respond to consultations on the impact on the environment, agriculture and sites of special scientific interest. The Department for Communities and Local Government will clearly be subject to consultation and have to devote work to furthering the project. Even the Home Office might be involved, for instance if trains run on a link between High Speed 2 and High Speed 1 and on to the channel tunnel, stations may need special configurations so that people can get on at Birmingham to go straight to Paris, with all the necessary checking for security and customs. 

The object of amendment 17 is simply to make sure that, as far as possible, such expenditure is included in an all-inclusive report. We should have tabled another amendment to include the very large sums that many local authorities are having to spend in response to the project, and to find such money from the HS2 Ltd budget, because, but for the project, the money could have been spent on other things. 

Pat Glass:  If jobs and apprenticeships are a key part of the case for HS2, and they are, it seems reasonable to keep a watchful eye on what happens and to report on it. I appreciate that it is difficult to measure and report on the creation of direct and particularly indirect jobs, but I have heard those arguments many times in many places—for example, that it is very difficult to measure the impact of an intervention with a child or to separate whether progress made in a school is from having a new head teacher or a new curriculum, and so on. My argument has always been that if we can measure the cost of a view, we can measure the cost of HS2: cost-benefit analysis does just that. Measuring the number of direct and indirect jobs created, whether temporary or permanent, may be difficult, but it is not rocket science. As a maths expert—my subject was maths—I do not accept for one second that rocket science is particularly difficult. Such things have been done many times before. 

Why do we need to do those reports? Because we need to take the public with us. As my right hon. Friend the Member for Holborn and St Pancras said, the public understand about jobs, particularly in my part of the world. We need to take them with us, and even if the jobs are not in my constituency, people there understand and value the fact that there are jobs across the country, whether they are on this line, near it or somewhere else. In my constituency, that has been a No. 1 priority all the time that I have been an MP, as it was for previous generations, ever since the coal mines closed down. When the successful and profitable Consett steelworks closed, there was almost 100% male unemployment overnight there, so we understand about jobs. 

Mr Burns:  Is the hon. Lady reassured that 97% of the contracts for Crossrail involve British companies? We are as anxious as I suspect she is that as many British companies as possible benefit from the building of High Speed 2. 

Pat Glass:  I appreciate and welcome that. Romag, the company in my constituency that made the security screen in the House of Commons, contacted me yesterday to say that it has been granted the contract for the windows for the Hitachi trains, which is hugely good

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news in my constituency. That will safeguard existing jobs and create new ones, but overshadowing all that is the fact that it will create 10 engineering apprenticeships, which is really good news. That is why it is important not only to include provision for apprenticeships as part of the contracts, but to report regularly on them. If job creation and apprenticeships are a key part of HS2, it is right that we should trumpet it as often as we can, but certainly at least once a year. 

12.30 pm 

Mr Burns:  It has been an extremely useful debate. I fully understand Opposition Members’ desire for detail in terms of the financial reporting duty. However, the amendments dilute the real purpose of the financial report and are unnecessary as the information being requested is being provided elsewhere. The purpose of the financial reporting duty is to provide Parliament with a clear sense of the preparatory expenditure that the Bill will facilitate. The addition of other factors will make proper scrutiny of that expenditure more difficult. The costs for HS2 Ltd are already included in the DFT annual accounts and we do not wish to duplicate that reporting. On whether we should include tax within our reporting lines, as this is an inevitable cost, we do not see the benefit of reporting on it separately. 

The hon. Member for Nottingham South also asked about HS2 Ltd and VAT. HS2 Ltd will not be liable for VAT if it is an intended trader. Crossrail and HS1 were not liable for VAT for that reason and we are currently in discussions with the Treasury on HS2. On reporting apprenticeships, HS2 will offer significant opportunities for the Government to create a skilled work force as part of the construction of HS2 and the associated works. We will, of course, aim to maximise the opportunities to create new apprenticeships. As several hon. Members mentioned, the Committee heard from several sources during the evidence sessions about the number of jobs that HS2 is envisaged to create. However, it might be for the benefit of the Committee if I update Members on the issues. 

To be frank, I was going to send a private note to the hon. Member for Nottingham South about apprenticeships but she has saved me having to do that by raising the matter in her comments. I hope the Committee will be pleased to know that HS2 Ltd predicts that more than 2,000 apprenticeships could be employed in constructing HS2, which is five times more than for Crossrail or the 2012 Olympics. She also asked about the 700 graduate trainees and apprenticeships that my right hon. Friend the Secretary of State mentioned yesterday. The 700 graduate trainees and apprenticeships are with the contractors working with HS2. I hope that that is of use to the hon. Lady. 

The Government will undoubtedly wish to report and to gain recognition for the successes that we envisage with regard to apprenticeships, job creation along the whole line of route and the jobs that will flow as a result of regeneration particularly, but obviously not exclusively, around the stations and the depots. It is not directly related to the purpose of the Bill, so adding this to the requirements set out in the Bill would dilute the purpose of the reporting duty. Although I do not disagree with the spirit of many of these amendments, I do not believe that it is necessary or appropriate to include them in the financial reporting clauses of the Bill. 

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Frank Dobson:  Does the Minister agree that it would be appropriate to include such clauses in the hybrid Bill to ensure that there is what can only be described as a statutory incentive to officialdom to do its job properly? I say that because for three and a half years, I campaigned to get a construction and rail industry training centre established in association with bringing high speed 1 into St Pancras and the refurbishment of St Pancras station. I had the enthusiastic support of the boss of that project. However, officialdom fouled it up at every turn, and it started operating only just as the project was coming to an end. A statutory obligation would be a big help; it would ensure that the bone idle people sitting around in offices actually do their jobs properly. 

Mr Burns:  That is an interesting interpretation. The right hon. Gentleman is a braver man than I am. I do not want to give him an instant answer, which I might live to regret, but I am grateful to him for raising that point and I will look into it. I give him my assurance that I will come back to him on it. 

Graeme Morrice:  The Minister said that amendment 38, which would include jobs and apprenticeships in the financial reports, would dilute the reports. I find that surprising. Clearly, when people receive jobs or become apprentices there is a financial spin-off to those people personally, to the Government through taxation and national insurance payments, and to the wider economy. The Government rightly bang on about the importance of increasing employment and apprenticeships. Over the past three years, they have made it a big issue and the Opposition have supported it. The Government are missing a political trick by not accepting the amendment. 

Mr Burns:  I am grateful to the hon. Gentleman. I am particularly touched that he is worried that we might miss a political trick. That is not something we like to do lightly. 

Frank Dobson:  Beware Greeks bearing gifts. 

Mr Burns:  The right hon. Gentleman anticipates my emotions. 

I am afraid I do not share the view of the hon. Member for Livingston. However, I can give him two assurances. First, I will do everything possible not to miss a political trick. Secondly, the Government, from day one, have determined to do all they can to improve and enhance people’s ability to find and be in work, whether by improving their educational, vocational and technical abilities, or by repairing—I will do this gently, because we have had a very amicable Committee—the dire economic situation in which we found ourselves in May 2010. We are determined to enhance and broaden the scope and opportunities for apprenticeships. 

Lilian Greenwood:  Will the Minister give way? 

Mr Burns:  No. I have not finished with the hon. Lady’s hon. Friend. I assure him that we will do all we can, as we increase and enhance the number of apprenticeships and opportunities associated with HS2, to make sure the country is well aware of the success of

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the Government’s policies. I will give way to the hon. Lady, then my right hon. Friend the Member for Meriden, then I will sit down. 

Lilian Greenwood:  Will the Minister give a little more clarity on the creation of apprenticeships? I welcome his comments, and we share his commitment to improving the opportunities that will result from this project. Earlier, he confirmed the figures given by the Secretary of State that there are already 700 graduate trainees and apprentices associated with this project, who are working for contractors. How does he square that with the figure he gave of the project creating 2,000 apprenticeships overall? It seems almost inconceivable that there are already 700, yet the total expected for the project, which will run for many years, is only 2,000. Surely it should be much higher. Should his ambition for the project not be greater? 

Mr Burns:  It was all going so well until now. 

Lilian Greenwood:  It is a genuine question. 

Mr Burns:  I appreciate that it is genuine and I take it in that spirit, but let me explain, because the hon. Lady may not totally have heard what said. The 700 with contractors is not simply apprenticeships but also comprises graduate trainees. However, “over” is the key word; I do not want to debate that, as we debated “at least” on Tuesday. The prediction—it can only be a prediction at the moment—is that more than 2,000 apprenticeships could be employed in constructing HS2. As the project moves forward over the years, that may prove to be a modest prediction. Neither she nor I knows at this stage. People can rest assured that, as long as we are in Government, we will be ambitious in ensuring that that prediction is exceeded as much as it can be. Those are the only accurate figures that I can give at the moment, as far as a prediction can be accurate. However, we are hungry and ambitious to exceed that figure, if we can, during the period that the railway is built. 

Mrs Spelman:  I welcome the estimate of 2,000 that my right hon. Friend gave, which, as he said, may rise. Will he give me one other assurance regarding the regional implications? Clearly, it will be important here in London that the apprentice opportunities pertain to the constituency of the right hon. Member for Holborn and St Pancras and the labour market in London, but with the interchange station in my constituency, the west midlands will be looking actively to ensure that there are apprenticeship opportunities there. As the line goes further north, I suggest that it will become just as important to hon. Members along the length of the line that the Government assure us that there will be a regional dimension to those apprenticeships. 

Mr Burns:  My right hon. Friend makes an important point. There have been discussions about that and about job creation in general—not simply apprenticeships and graduate traineeships—and there are wide-ranging different figures. The DFT prediction, which is possibly conservative with a small c, is that HS2 will create 100,000 jobs to do with physically building the railway and associated with the building of it, such as regeneration

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around the stations, depots and elsewhere. But the prediction is much more ambitious in respect of core cities. It believes that there will be up to 400,000 more jobs in the various areas. 

We will have to wait and see what the reality is in due course. However, the important thing is that, contrary to what a number of people will say to try to do down the project, this is not a London-centric project. Some 70% of the jobs, the work and the benefit are associated with being outside London. Yes, of course, London will get a benefit with the presence, building and development of high-speed rail, and it will also get apprentices and job creation, but the predictions, as far as we can estimate at the moment, are that 70% of that will be outside London. 

If my right hon. Friend talks to business leaders, local authority leaders and LEPs in Birmingham, Manchester, Leeds and other parts of the route, she will find that they are keen on the project because they see the massive opportunities for job creation and for training up a skilled work force. Those skills will not provide people with a one-off ability to build HS2; they will have skills that can be used for other projects and other lines of work. That is, to my mind, a fantastic opportunity. For those reasons, I urge the Committee to accept the Government’s amendment and reject the others if they are pressed to a Division. 

The Chair:  May I say, for clarity, that the comment made by the right hon. Member for Holborn and St Pancras was his personal opinion and certainly not the opinion of the Committee? I certainly do not want my mailbox filled with messages from people claiming to be bone idle. 

Frank Dobson:  I shall be ready to reply to any that I receive. 

Amendment 37 agreed to.  

Amendment proposed: 35, in clause 2, page 2, line 11, at end insert— 

‘(d) any tax incurred through expenditure under section 1, and any tax that has been reclaimed from the Treasury in the relevant reporting period.’.—(Lilian Greenwood.)

Question put, That the amendment be made. 

The Committee divided: Ayes 5, Noes 8. 

Division No. 5 ]  

AYES

Dobson, rh Frank   

Glass, Pat   

Greenwood, Lilian   

Mahmood, Mr Khalid   

Morrice, Graeme (Livingston)    

NOES

Burns, rh Mr Simon   

Hopkins, Kris   

Lumley, Karen   

Morgan, Nicky   

Reid, Mr Alan   

Spelman, rh Mrs Caroline   

Stewart, Iain   

Vickers, Martin   

Question accordingly negatived.  

Amendment proposed: 36, in clause 2, page 2, line 11, at end insert— 

‘(d) the administration costs of the project’s delivery body’.—(Lilian Greenwood.)

Question put, That the amendment be made. 

Column number: 265 

The Committee divided: Ayes 5, Noes 8. 

Division No. 6 ]  

AYES

Dobson, rh Frank   

Glass, Pat   

Greenwood, Lilian   

Mahmood, Mr Khalid   

Morrice, Graeme (Livingston)    

NOES

Burns, rh Mr Simon   

Hopkins, Kris   

Lumley, Karen   

Morgan, Nicky   

Reid, Mr Alan   

Spelman, rh Mrs Caroline   

Stewart, Iain   

Vickers, Martin   

Question accordingly negatived.  

Amendment proposed: 38, in clause 2, page 2, line 11, at end add— 

‘(d) jobs and apprenticeships directly created in the relevant reporting period.’.—(Lilian Greenwood.)

The Committee divided: Ayes 5, Noes 8. 

Division No. 7 ]  

AYES

Dobson, rh Frank   

Glass, Pat   

Greenwood, Lilian   

Mahmood, Mr Khalid   

Morrice, Graeme (Livingston)    

NOES

Burns, rh Mr Simon   

Hopkins, Kris   

Lumley, Karen   

Morgan, Nicky   

Reid, Mr Alan   

Spelman, rh Mrs Caroline   

Stewart, Iain   

Vickers, Martin   

Question accordingly negatived.  

Clause 2, as amended, ordered to stand part of the Bill.  

Clause 3 ordered to stand part of the Bill.  

Question proposed, That the Chair do report the Bill, as amended, to the House. 

Mr Burns:  I would like briefly to thank you and your co-Chair for the way in which you have chaired what has been a relatively short but very important Bill Committee. We have had the opportunity to discuss the Bill in detail. I thank your Clerk and other staff who have ensured that our proceedings have run smoothly. I thank my right hon. and hon. Friends for all that they have done during the course of the Committee, whether at the evidence sessions or during line-by-line consideration. I would like to thank my officials on the Bill team from the Department for Transport, who have done a tremendous amount of work and have had to put up with me. They have done it with a degree of gentleness and encouragement. I also thank my private office, who have also kept me on the straight and narrow so that we could proceed smoothly. 

I also thank Opposition Members for the constructive, amicable way in which they have conducted these proceedings. We may have had differences of opinion or of interpretation on how to strengthen and improve the Bill, and I am afraid that I have not been as amenable as the hon. Member for Nottingham South thought. It would be very tactless of me not to say that it is a pleasure to thank my hon. Friend the. Member for

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Loughborough for the superb way in which she whipped the Committee—sensitive, with a light touch, firm and fair. 

Unusually, I would like to thank the right hon. Member for Holborn and St Pancras. When I was in his position for 13 long years, I had to take two rather large health Bills for the Opposition. In the days of the new model army of the Blair years—I know that he was not, possibly, a Blairite—the Government of the day refused steadfast to accept any Opposition amendments to anything, even if they were as obvious as sliced bread. Through my diligent research on one of those health Bills, I suddenly discovered that I could table an amendment that the Government could not refuse to accept. To show my brilliance at thwarting the Whips of the governing party, I had noticed that there was a typographical error, and a word that should have been “it” was “is”. I tabled the amendment to change it and the Government were forced to accept it, although sadly they could not bring themselves to allow me to table it on Report; it had to be done by the Government. 

The reason I am going on with this shaggy dog story, which will end, is that the right hon. Gentleman, to his credit, produced an amendment with my right hon. Friend the Member for Chesham and Amersham (Mrs Gillan) that was so compelling in its lucidity and its intent that even I could not refuse to give a commitment to look at the issue again, with a view to possibly bringing forward something on Report. He has therefore succeeded with me in a way that, except on a technicality, I could never succeed with his Government. For that, I thank him very much. 

Frank Dobson:  I agree with all the thanks, but I would also like to put on record the fact that this is the second time that you and I have served on a Bill, Mr Sheridan. The first time, I was supporting your private Member’s Bill to establish a gangmasters agency. It has always been my view that we are pretty bad at producing effective legislation, but the Gangmasters (Licensing) Act 2004 is one of the most successful, effective and practical measures ever put forward, and I hope people will recognise that. I am reminded of that because this is the first time you and I have been together on a Bill Committee since then. 

Lilian Greenwood:  Mr Sheridan, I would also like to thank everyone who has assisted with the Bill. I particularly thank you and Mrs Brooke for chairing the Committee kindly and patiently to ensure that we could give full flow to the important issues at the heart of the Bill. I very much thank the Clerks to the Committee, who have been patient in assisting us in tabling amendments, and the officials, who, I am sure, have done a good job of answering all the questions Opposition Members have put to the Minister. I would also like to thank the Hansard reporters and the doorkeepers for their attention. 

I thank the other Members of the Committee, but particularly Opposition Members and our absent Whip, who has been marvellous; indeed, he ensured he did such a good job that we can manage without him today. 

Frank Dobson:  The essence of whipping is being absent. 

Lilian Greenwood:  It was such a light touch; we needed no assistance. 

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I particularly thank my right hon. Friend the Member for Holborn and St Pancras for the way in which he has stood up for the interests of his constituents. They must be very proud of how he has done that. 

This is a really important Bill, and it is important that there is cross-party support for what is undoubtedly an immensely important project for the country. I am sorry that the Minister and I have not always agreed on the detail, but I am sure we both look forward to continuing our discussions on Report when we return in the autumn. 

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The Chair:  All that is left is for me to thank hon. and right hon. Members for being here and for behaving in the way they have. I thank the Clerks and Hansard, without whom we would not survive. I also thank our doorkeepers. I wish everyone a happy recess, and I use the term deliberately, because we need to remind those outside that this is not a holiday, and some of us will be working. Happy recess, and I look forward to seeing you in September. 

Question put and agreed to.  

Bill, as amended, to be reported.  

12.58 pm 

Committee rose.  

Column number: 269 
Written evidence reported to the House

HSR 23 Penny Gaines 

HSR 24 London Borough of Newham 

HSR 25 Cllr Ray Puddifoot (Leader of Hillingdom Council) 

Column number: 270 

HSR 26 Stop HS2 

HSR 27 Digbeth Residents’ Association, Birmingham 

HSR 28 Dr Paul Hoad 

HSR 29 Michael Edwards (The Bartlett School, UCL) 

HSR 30 Camden London Borough Council supplementary 

Prepared 19th July 2013