Letter from Lord Tordoff, Chairman of the Committee,
to John Watts, MP, Minister for Railways, Roads and Local Transport,
Department of Transport
Sub-Committee B, which has kept the above proposal under
scrutiny during the course of its present enquiry on the Commission's
White Paper on railways (9654/96), considered it again at its
meeting on Thursday.
The Sub-Committee was surprised by the distinct lack of enthusiasm
for the PACT scheme expressed in your Explanatory Memorandum
of 7 November. The Sub-Committee believes that there are compelling
social and environmental reasons for encouraging the transfer
of freight from the congested road network onto rail, and that
measures to promote combined transport can play an important part
in this process. Given the very modest budget proposed, and given
that PACT is intended to fund research and development on the
practical obstacles faced by combined transport operations rather
than subsidising those operations directly, the Sub-Committee
is not convinced that PACT poses any substantial threat to the
principles of sound railway finances advocated in the White Paper.
You question the proposal on grounds of subsidiarity, saying
that "it should be for Member States to fund and administer
schemes of this sort", but the Sub-Committee is unaware of
any domestic equivalent to the PACT scheme. In any case, since
combined transport is most economic over longer distances which
will usually involve transit through more than one Member State,
the Sub-Committee believes that there is a strong case for action
at Community as well as at national level.
The Sub-Committee would therefore urge you to support the
proposal and to address your concerns about effectiveness and
transparency by means of appropriate amendments to the text, rather
than by opposition to the programme as a whole.
A scrutiny reserve will be maintained pending your reply.
10 February 1997
Letter from John Watts, MP, Minister for Railways Roads
and Local Transport, Department of Transport to Lord Tordoff,
Chairman of the Committee
Thank you for your letter of 10 February about the Commission's
proposal for Community grant-aid towards combined transport projects
(10600/96). You queried the Government's line.
We share your Sub-Committee's views about the environmental
and wider social benefits of attracting freight from road to
rail. In recognition of that, there are two types of grant available
in Great Britain to assist rail freight. One is a capital grant
scheme for rail freight facilities (this scheme also applies to
inland waterway transport) and the other is a subsidy to help
defray the costs imposed by Railtrack for access to the rail network.
Neither grant is limited to combined transport, however, conventional
freight operations also qualify, as they can deliver equal, or
greater, benefits. Nevertheless Freightliner, BR's former domestic
and deepsea intermodal business, which was sold to a management
buy-out team last May, is a notable example of a grant-aided
combined transport operation, as it is receiving a track access
grant of up to £75 million over five years. I think that
amply demonstrates the Government's commitment to shifting freight
from road to rail.
While PACT funding has hitherto been devoted in part to assist
in meeting R&D costs, the Commission envisage that Community
grant-aid will progressively shift in favour of subsidising start-up
costs for pilot projects. This is at variance with Community
rules on state aids for combined transport which debar aid for
We are not alone in expressing concerns about the proposal.
Germany, like us, has budgetary concerns. Other Member States
have worries about the scope and intended purpose of the new scheme,
too. In that context, there seems to me to be a fundamental mismatch
between the White Paper and PACT. In particular, it makes no sense
to argue for a more commercial approach to the provision of rail
freight services and greater transparency of state aids and at
the same time bring forward an expanded Community scheme whose
effect would merely be to pour (EC) subsidy on top of (national)
subsidy, whether directly or indirectly. I regard it as unfair
that those countries which have taken action to get their rail
freight operations onto a proper commercial footing and have
thereby generated public expenditure savings should be required
as a consequence of the PACT proposal to give up some of those
savings to subsidise operations in Member States that haven't.
That is why the Government is reluctant to support the PACT
27 February 1997
Letter from Lord Geddes, Chairman of Sub-Committee
B, to John Watts, MP, Minister for Railways, Roads and Local
Transport, Department of Transport
Thank you for your letter of 27 February to Lord Tordoff
in reply to his letter of 10 February. Your letter was considered
by Sub-Committee B this morning.
The Sub-Committee was struck by the suggestion in your letter
that, to the extent that PACT funding is used to subsidise start-up
costs for combined transport projects, it contravenes Community
state aid rules. In view of the restrictions imposed by Article
4(3) of the draft Regulation, we would welcome clarification of
your concerns on this point.
You draw attention to existing rail freight grants in the
United Kingdom and we recognise the important role these play
in encouraging the transfer of freight traffic from road to rail.
Nevertheless, if these grants can only provide funds for the
specific purposes outlined in your letter, we cannot see how they
constitute a domestic equivalent to the PACT scheme which is
intended to assist the development of new combined transport
We do not therefore accept your view that PACT would simply
"pour EC subsidy on top of national subsidy". We believe
it complements national grants and could be of direct benefit
to operators in the UK as well as in other Member States.
Mr Ian Mackay of your Department's Rail Industry Sponsorship
and Privatisation Division has helpfully provided a short note
on changes to the proposal which have recently been secured at
Working Group level, and we would hope that on the basis of those
changes, you will be able to support the proposal at next week's
Council meeting. We would urge you to do so, and we lift our
scrutiny reserve on that basis. I would be grateful if you could
let me know the outcome of next week's meeting.
6 March 1997
Letter from John Watts, MP, Minister for Railways,
Roads and Local Transport, Department of Transport, to Lord Geddes,
Chairman of Sub-Committee B
Thank you for your letter of 6 March in response to mine
of 27 February about PACT (10600/96).
The March Council reached political agreement on the proposal
by qualified majority. We indicated that we would vote against
the text when formally adopted because, as you know, we do not
feel that EC Community funding is necessary when Member States
have it within their power to make road/rail combined transport
more competitive by liberalising access to the rail network and,
where appropriate, introducing targeted grant schemes of their
own at national level to assist at the margin in attracting freight
from road to rail, as we have done.
7 April 1997