Select Committee on European Communities Twelfth Report


Letter from John Watts, MP, from the Minister for Railways and Local Transport, Department of Transport, to Lord Geddes, Chairman of Sub-Committee B

  Following the Committee's Report on the European Commission White Paper A Strategy for Revitalising the Community's Railways and the conclusions and recommendations reached, I attach a Memorandum setting out the Government's response.

  We welcome the Committee's endorsement of the aims of the White Paper and their recognition that there is scope to make substantial improvements to the viability of the Community's railways in the short as well as in the longer term. The Government is committed to assisting the Commission in finding practical ways to take positive action on its proposals.

27 March 1997

Government Response to Committee's Conclusions

  100. We agree with the Commission and witnesses that rail faces serious problems and that major change is needed if its decline is to be halted. Such change, if it can be realised, may take a generation and would require a concerted political will to achieve. Although railway operators and Member States have principal responsibility for effecting change, there is also a good case for action at Community level.

  Response: The Government agrees with the Committee that major change is needed and is concerned to do all it can to ensure that momentum on the Commission's initiative is not lost. Political will is of paramount importance but it is inevitable that at Community level some changes will be more difficult and time-consuming to take forward than others. The UK's Presidency of the EU during the first half of 1998 provides a timely opportunity not only to encourage the Commission to bring forward specific proposals as soon as possible, but to ensure that positive action is taken when these are introduced.   101. Rail is an important means of transport which imposes fewer social and environmental costs than road, but its potential to reduce the volume of road traffic is limited.

  Response: Given the economic, safety and environmental benefits that an efficient railway can bring, the Government is keen to encourage reforms which will help to maximise the realisation of those benefits. This should enable the railways to make a valuable contribution to reducing dependency on the car and lorry.   102. We support the introduction of market forces into rail but offer no opinion on the merits of privatisation. Member States should be encouraged to negotiate public service contracts with passenger rail operators.

  Response: The Government welcomes the Committee's support for the introduction of market forces in the rail sector. Member States can achieve this in a number of ways, most importantly by separating management and ownership of infrastructure from operation of rail services. We agree that public service contracts with operators are also important, as they make explicit the level of service that passengers can expect. However common issues such as level of debt and subsidy must be sorted out as it is important to ensure that there is a level playing field for bidders.

  103. We question the case for a uniform cut-off date for historic debt. Measures to reform railway finances should be applied on a case-by-case basis.

  Response: The Government is not convinced that consideration of debt on a case-by-case basis is the best way forward since it could lead to protracted negotiations and difficulty in arriving at solutions. Those Member States whose cases were taking the longest to resolve, or who were among the last to be considered, could benefit in the interim at the expense of those whose cases could be dealt with quickly. By comparison, a uniform cut-off date is a more attractive option but, in order to avoid distortion of competition when debt is relieved, it will be necessary for the Community to agree some basic rules; further work is therefore required. The Government would argue that successful restructuring does not depend on the relief of all past debt, but reduction to a level which does not impede sound financial management.

  104. We support the principle of open access for freight and for international passenger traffic, but for domestic passenger services dependent on subsidy we advocate a system of exclusive concessions which should be open to Community-wide tender.

  Response: We agree with the Committee's opinion that we should support the principle of open access for freight and international passenger services and therefore support the Commission proposals for a Directive to amend Directive 91/440/EEC accordingly. We also agree that moves towards greater open access should be approached cautiously in the light of the need to maintain network benefits, and of the continuing dependence of many services on subsidy.

  105. We are not convinced that it is necessary to divide national railways into separate business units dealing with infrastructure and train operators.

  Response: The Government believes that clear separation between infrastructure and operations is desirable to achieve transparency in the railway industry and to aid the regulation of those parts of the system that constitute the natural monopoly, i.e., the network. For national railways, complete separation is preferable to merely keeping separate accounts within a single railway business. Totally separate companies encourage competition and allow managements to focus more clearly on their objectives. Other Member States which have also separated infrastructure and operations into separate companies, or are in the process of doing so, include Germany, France, Spain, Netherlands, Austria, Portugal, Denmark, Sweden and Finland.

  106. We welcome the Commission's proposal to establish "rail freight freeways" as voluntary agreements among infrastructure authorities in co-operation with train operators.

  Response: The Government agrees and is participating fully in discussions aimed at early introduction of rail freight freeways.

  107. Member States should adopt track access charging arrangements for international trains that are broadly compatible with each other.

  Response: We agree with the Committee that track access charges for international operators must be broadly compatible but this is a very complex area and there should be no attempt to lay down anything more than broad charging principles, the most important of which is that charging regimes should be non-discriminatory as between operators.

  108. We attach great importance to the case for a Community regulatory authority. Such an authority need not be a large bureaucracy, but must have adequate powers.

  Response: The Community is already a regulatory authority on matters such as competition and state aids and has regulatory powers in relation to Directive 91/440/EC which can be enforced in the event of a Member State failing to observe its requirements. These powers would be further enhanced nationally by new regulation arising from the implementation of proposals in the White Paper. The establishment of a further supervisory or regulatory body with real decision making powers would require changes in the Treaty. The Government believes that the first step is to identify the tasks that need to be undertaken or regulated, consider how best this can be achieved within existing powers and provisions and only then, and if proved absolutely necessary, consider the establishment of a Europe-wide body.

  109. It is likely to be more cost-effective to pursue the benefits of greater interoperability by developing compatibility in systems and equipment than by aiming for total harmonisation.

  Response: The Government warmly welcomes the Committee's opinion on interoperability. Its view has been, and continues to be, that technical and administrative measures to effect interoperability should be kept to the minimum necessary to ensure the safe and efficient running of through trains on the network and that the potentially high costs do not outweigh its many benefits. The UK is playing an active role in the preparation of technical specifications for interoperability with a view to ensuring compatibility rather than total harmonisation. In this way interoperability will become a practical proposition, achievable in a realistic timescale, to the benefit of rail service providers and customers alike.

  110. The Commission should promote common safety appraisal techniques to achieve cost-effective safety, supervised by an independent, Community-wide body.

  Response: The Government agrees that common safety appraisal techniques are a desirable objective, but only in those areas where the Community has competence, for example in the field of interoperability. However, even here technical and administrative provision must be subject to cost/benefit and only laid down to the extent necessary to achieve the overall goal. Responsibility for applying safety appraisal techniques to specific areas, particularly those which are not subject to interoperability requirements and are therefore beyond the Community's competence, should remain with the individual Member States.

  111. The employment prospects of railway workers are more likely to be protected by making rail more competitive. The Community's Social Fund might be used to mitigate the impact of job losses.

  Response: The Government agrees that employment prospects are more likely to be enhanced by making rail more competitive. The White Paper proposes ways in which to revitalise the Community's railways and reverse their decline, which in turn should lead to an expansion in services. Some job losses may be necessary in the short term, as companies restructure in an effort to become more efficient and cost-effective. But much will depend on the pace of change and the way that Member States manage and provide for their workforce; with careful management much reduction could be achieved by natural wastage. In the UK for example, privatisation legislation contains protection for employees in terms of pensions. For railway employees, continuity of employment has been protected by general employment legislation and the Community Acquired Rights Directive. The Community's Social Fund should not be used to benefit those Member States who have not provided for their employees, at the expense of those who have.

Department of Transport

International Railways

March 1997

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