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Lord Mackay of Ardbrecknish: We, as the official Opposition, welcome these amendments. It seemed to us almost unbelievable that every member of the assembly, even members of the opposition--and I trust there will be an opposition and that it will not actually be like a new-born Supreme Soviet where everybody will be consensually on the Government's side--would be bound by the Official Secrets Act. That would be a really amazing position. I can just imagine that suggestion being made to some Members in the other place--even some on the Government's own side. They would be horrified to find themselves, the moment they became Members of Parliament, bound by the Official Secrets Act. The poor old members of the Welsh assembly would have been in a worse position than some Members of your Lordships' House and Members of the other place who are government Ministers. There may be some who are still, collectively and for life, bound by the Official Secrets Act.

This is a sensible amendment but in some ways it links back to the series of amendments we have just had about names and, more importantly, to the amendments we discussed yesterday evening about the concordats and who the concordats were between. One of the two fundamental differences between the Welsh Bill and the Scotland Bill is that the power in this Bill is devolved to the assembly as a collective whereas the power in the Scotland Bill has been devolved to the executive of the Scottish Parliament. That is an enormous difference and serious consequences flow from that. I do not want to rehearse the argument about concordats but it is a similar, parallel argument to the one about the Official Secrets Act. The powers of the Secretary of State are devolved to the assembly and agreements which would normally be between governments or ministers have to be between the Government here, departments of state here at Westminster, and the assembly.

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Equally, that led the Government to the view that all members of the assembly should sign up to the Official Secrets Act. I am pleased that the Government have accepted the arguments of my colleagues in another place that this was a ridiculous proposition that could not be defended in public. I therefore welcome the amendment.

I hope that the Government will start to think through some of the consequences of the principle which underlies this; namely, that the Secretary of State's powers have gone to the assembly. It would be a much clearer transfer of powers if they were to go to the executive of the assembly. Then things like concordats and names would be very much simpler. Having said that, one swallow in this case does make a little bit of a summer and I welcome the amendment.

The Earl of Balfour: With very great respect to the noble Lord, Lord Williams of Mostyn, I was somewhat surprised that with this amendment he did not also deal with Clause 81. I am very satisfied with the explanation that Clause 81 goes far too far, but could I ask the noble Minister what is the position of a presiding officer in, for example, Clause 76?

Also, while I am on my feet, I should add to my question of last night on the Motion that Clause 36 stand part of the Bill as regards inquiries. There is the provision for a person to be required to take an oath under Clause 76 when required to attend proceedings of the assembly. However, Clause 36 deals with an inquiry, which I imagine could be held anywhere in Wales, as such inquiries can be held anywhere in Scotland. In England I think such inquiries are always held in this Palace of Westminster.

Going back to Amendments Nos. 119A and 254A, including, perhaps, Clause 81, I ask the noble Lord, Lord Williams, to pass on to his Scottish colleagues that there is at present no such provision about secrets in the Scottish Bill. I hope he agrees with me in that I think there should be.

Lord Williams of Mostyn: Perhaps I may deal with those latter points first. I told the noble Earl yesterday that his questions on Clause 76 would be researched and I undertook to write to him as soon as possible. I indicated that it would be unlikely that the detailed answers would be available for him today.

I take the noble Earl's point on the Scottish question and I am able to tell him that if amendments to the Scotland Bill on Report in the Commons are accepted, members of the Scottish executive will be covered by the Official Secrets Act. I think he has correctly identified a gap which it is the Government's present intention to fill.

I was very pleased with the generous response of the noble Lord, Lord Mackay, that we have listened carefully, as I am always advised to do by the noble and learned Lord, Lord Simon of Glaisdale, and have demonstrated the flexibility which is the hallmark of the Government in your Lordships' House.

On Question, amendment agreed to.

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Clause 54, as amended, agreed to.

Lord Haskel: I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

Channel Tunnel Rail Link

4 p.m.

Baroness Hayman: My Lords, with the leave of the House, I will now repeat a Statement being made in another place by my right honourable friend the Deputy Prime Minister. The Statement is as follows:

    "Madam Speaker, mindful of your recent request, I shall keep this Statement short, as far as is possible for such a complicated subject of such importance to this House. To assist honourable Members, I shall make arrangements for a memorandum to be placed in the Library of the House.

    "In March 1996 the development agreement to build the Channel Tunnel Rail Link was awarded to London and Continental Railways, known as LCR. LCR also took control of the Eurostar service. Its plan was to commence construction in late 1997. The agreement provided for a taxpayer contribution worth £1.8 billion. When I had the chance to examine the details of the deal put in place by the previous government, I was appalled. They took the cheapest bid based on over-optimistic forecasts of Eurostar revenue, without even commissioning their own independent forecasts, a failing we have now put right.

    "The Government were seriously exposed because of the small financial commitment made by the private sector. Furthermore, as a consequence of the previous government's intention to conceal public subsidy of the Channel Tunnel, Eurostar was hampered by the requirement to pay Eurotunnel for train paths it was not using. Even this week I was asked to find £100 million to pay for specially designed sleeper trains which do not work, have never been used, and are now lying idle in a field.

    "The kindest thing I can say about this whole agreement is that it was flawed from the start. In January of this year it almost collapsed. The company could not fulfil its contract. At that point I was faced with a clear choice. I could have abandoned the present contract with LCR and invited new tenders. But that would have meant two years or more of delay, with all the blight and uncertainty that would have caused. The equivalent of two-thirds of the grant would have been spent on Eurostar's debts and continuing losses with nothing to show for it. Alternatively, I could ask it to reconsider the financing of the project, and come forward with proposals to meet all its original obligations. That was the path I chose.

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    "I explained that LCR had requested an additional £1.2 billion of taxpayers' money, on top of the £1.8 billion already committed. That was unacceptable. I gave LCR one month to come up with new proposals, and subsequently extended that period ultimately to this week. At the end of March LCR made an improved proposal, but still failed to meet the Government's requirements.

    "I am very aware of the importance which honourable Members on both sides of this House attach to this project which had an approved passage through the House. I have always believed that Britain should have a high speed passenger and freight link to Europe, equal to those on the other side of the Channel. This is an important project, comparable to any which this Government are promoting. It is a key part of our integrated transport policy. It is a national asset which will bring benefits not just to the south-east, but to all parts of Britain. It is clear this country wants this railway built. All parties supported the Channel Tunnel Rail Link Act, which passed its Second and Third Readings unopposed.

    "This project offers immense benefits: economic, transport, and environmental; improved speed, reliability and capacity for international and domestic services--for both passengers and freight; and it will also play a major part in regenerating north Kent and the East Thames corridor including Stratford and King's Cross.

    "The Government want to see this project proceed. But, as I have made clear, not at any price. My firm view was that LCR could carry on if it was able to deliver the whole project from the Tunnel to St. Pancras according to the contract. I made clear that in addition the Government required: a further reduction in the proposed additional cost to the taxpayer; a robust financing plan, based on realistic forecasts for Eurostar; a balance of incentives which would ensure the construction of the whole of the rail link; and an increased risk transfer to the private sector.

    "For the past four months we have been involved in intensive negotiations, and I can now inform the House of the outcome. The call on public finances represents good value for the taxpayer. There is a robust financing plan. It is based on a proper assessment of future Eurostar revenue. The incentives to complete the whole link are in place. The private sector will take a greater share of risk. In short there will be a high speed Channel Tunnel Rail Link.

    "Today I signed with LCR and Railtrack a statement of principles which meet all these requirements and fulfil the contract agreed by the previous Secretary of State, the right honourable Member for Hampshire, North West. Under this public private partnership, LCR has been strengthened. There is a new management team in place, and LCR has agreed to raise more equity to support the project. Railtrack has agreed to take a key role in building the link. It will manage the

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    construction for the railway up to north Kent, and will commit to purchase it upon completion. It will have an option to build and buy the remainder of the link.

    "LCR has secured a strong partner to operate Eurostar. It considered two very strong bids, one from Virgin, the other from a consortium comprising British Airways, National Express, and the national railways of France and Belgium. It has today agreed to award that contract to the consortium. LCR has the same obligations to build the entire 68 miles of railway from the Channel Tunnel to St. Pancras in London via Ebbsfleet and Stratford, entirely in accordance with the Channel Tunnel Rail Link Act, endorsed by this House. It will be built to the same route and the same specification, to the same high standards, and with the same environmental and heritage safeguards, undertakings and assurances given during the passage of that legislation.

    "Construction will begin towards the end of this year. The stretch from the Channel Tunnel to the turn-off to Waterloo in Kent is due to be completed by 2003. At this stage services from Waterloo will benefit from the new high speed line. Construction beyond this point is expected to commence in 2001 with the line through Ebbsfleet and Stratford to St. Pancras finished by 2007. This will include the proposed new Thameslink station at St. Pancras. There will be no change of route under this agreement. It will be exactly as in the Channel Tunnel Rail Link Act. The Eurostar consortium will operate the trains from Waterloo to Paris and Brussels, and in due course services from St. Pancras.

    "I recognise that many honourable Members wish to see an early start to regional services. I can assure the House that LCR remains under an obligation to provide the infrastructure for regional Eurostar services. The trains for those services are currently lying idle. I have therefore asked the consortium to review urgently the feasibility of such services, and put proposals to me before the end of the year. I shall inform the House of the outcome of that review in due course.

    "In addition, the consortium has a vision of Heathrow as a gateway to Europe for services from across the country. The consortium proposes to establish from as early as 2001 a service from Heathrow Airport to Paris. Heathrow is the world's busiest international airport. It is already Britain's biggest bus station, connected to the largest underground network in the world. This new service should in time establish Heathrow as an integrated transport interchange of international importance, connecting long haul air services directly into the European high speed rail network.

    "I have always made clear that the Government required a significant degree of risk transfer to the private sector and this deal achieves that. If construction costs overrun, Railtrack will carry the full cost. If Eurostar revenues are less than forecast, Railtrack and the consortium will share the burden along with the Government. I have made clear that there must be a strong incentive to complete the

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    whole link from the Tunnel to St. Pancras and this deal achieves that. The Act requires the whole link to be built. The contract obliges LCR to build the entire link.

    "I have always made clear that the Government required a fair deal for the taxpayer, consistent with the Government's existing obligations under the contract and this deal most certainly achieves that. The basic grant will remain at £1.8 billion and there will be no requirement for additional Government support before the year 2010. Moreover, following intensive negotiations, the extent of the Government's additional contribution, will not be the £1.2 billion requested in January, not even the £700 million which may have been read in the press this week, but £140 million and with the probability that after the year 2020, our share in the benefits will more than compensate for this extra grant.

    "All the parties have contributed to this improvement--LCR, Railtrack, the consortium and the Government. Recognising the unique features of this project, and our commitment to strengthen international rail transport links, we have agreed that the Government's credit will stand behind £3.7 billion of bonds issued by LCR privately in the City to fund the project. The debt will be repaid out of the proceeds of the sale of the completed link. The risk of the Government incurring liability under the guarantees is therefore remote. The Government will support the financing package which will allow this project to proceed now, and at the minimum financing cost. The alternative would have been considerable delay and increased costs.

    "But this Government do not intend to offer taxpayers' support without something in return. This Government believe that in a real public-private partnership, not only the costs are shared, but also the benefits. The Government are sharing the risk, so it is only right that the taxpayer should share in the benefits. I have therefore agreed with the parties that the Government will take a public stakeholder share in LCR yielding a 35 per cent. share of the company's pre-tax surplus after 2020. The Government will also have a 5 per cent. stake in the Eurostar management company. This will be a public-private partnership with strong public accountability. Moreover, if LCR decide to sell the business, the taxpayer will share at least 35 per cent. of the proceeds. As I said earlier, these extra benefits should not simply balance the additional £140 million of public subsidy. This deal should provide that taken over the long-term LCR pays a premium to the Government.

    "Under the original plan the concession was for 999 years. Eurostar was privatised forever. The parties have now agreed to reduce the concession to only 90 years. In 2086 this railway and the Eurostar service will revert to public ownership, along with the Channel Tunnel itself. I look forward to appearing before the House on that occasion to announce that event.

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    "There is one more point. I have negotiated a share for the Government in any savings of construction cost. I have also negotiated a mechanism to prevent any of the parties involved enjoying excessive windfall gains at the taxpayers' expense. In this way we aim to avoid any repeat of the fiascos which have marked railway privatisation.

    "There is still much work to be done. Regulatory bodies must be satisfied. There will be many more months of negotiation on the detail. This is an agreement snatched from the ashes of LCR's collapse. The Channel Tunnel Rail Link will be built all the way to St. Pancras. Construction will begin this year. We will join the fast track to Europe. This is a deal which is good for integrated transport, good for the environment and good for the taxpayer. And it is good enough for me to commend it to the House".

My Lords, that concludes the Statement.

4.14 p.m.

Earl Attlee: My Lords, I am grateful to the Minister for repeating this over-spun and well-leaked Statement made in another place by her right honourable friend the Deputy Prime Minister. The Statement is complex and the memorandum even more so.

As the Minister said, the project and the original CTRL Bill and its principles enjoyed cross-party support in both Houses. The project is indeed very important for the country and for the population of London where total unemployment still compares to that of Scotland and Wales combined. So Stage two is vital to London as well as to the rest of the country.

At what point does the Minister expect Waterloo International station to become saturated? Does she expect that to happen before or after the completion of Stage two? What guarantees can she give that Stage two will actually be built whatever the CTRL Act says? The Statement appears to criticise the previous government's assessment of the LCR bid. On what basis have the passenger projections now been calculated and will the Minister make that information public in due course?

Does the Minister agree that government exposure will not be the £140 million alluded to in the Statement; not £700 million, and not £1,200 million, but that the grand total of grant and guarantees will be £5.4 billion? How does that equate with the statement that this private sector will take a greater share of the risk? How is this commitment to be treated? If it is described as PFI, is it to be classified as public expenditure and will it appear in the Red Book?

Will not the "strong public accountability" in the Statement also incur increased responsibility, management and ultimately interference with the project? Can the Minister assure the House that neither LCR nor Railtrack will have any pretext to come back to the Government to ask for more public money in the future and if they do, will it be refused?

The Minister was kind enough to refer to the success of Heathrow, so well run by the privatised BAA. She referred to Britain's biggest bus station at Heathrow, serviced by Britain's privatised bus industry. Finally,

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can the Minister say how much of Eurostar's new management company will be controlled by the state-owned French and Belgian railways?

In conclusion, we support the completion of the CTRL, but we shall have to look much more closely at the financial arrangements in order to determine their nature.

4.17 p.m.

Baroness Thomas of Walliswood: My Lords, perhaps I should begin by congratulating not so much the Minister as the Labour Administration on their exceptionally successful media management in the run-up to this announcement. We were led to believe that something not very satisfactory was going to happen, but we are now told that something rather satisfactory is going to happen. It is probably a case of 10 out of 10 for that.

I am delighted to support the good news which is contained in the Statement. I am glad that the noble Baroness was able to repeat the Statement in this House so soon after it was made in another place. We share the Government's assessment of the importance of this project, not just for people who live in the South-East; not just for the ability to get passengers across to the Continent, but also because of its importance to freight and to the regeneration of the East Thames corridor. The scheme is important, therefore, on both environmental and economic grounds and well beyond the confines of the South-East itself. I hope that the assurances in the Statement that progress will be made in extending Eurostar's services beyond the South-East are well founded, and that the Minister can say a little more about that.

I am glad that the conditions of the original deal and Act with regard to completion of the entire project have been retained. I am particularly glad to welcome the fact that the Government have obtained, as it were, a stake in the company in return for the investment that is being made in the asset which is being created. This seems an extremely sensible example of public/private co-operation and very much in line with our own thinking on these matters.

Naturally, however, I have some questions. I think I am right in saying that the timing of the second stage into St. Pancras in effect amounts to a delay of some four years on the original estimate. That means that there will be quite a long period when Eurostar is competing for track space on the congested lines from north and east Kent into London. Can the Minister tell us anything about the operating schedules and whether they will be affected? I refer both to commuter traffic--those lines are already crowded at rush hour--and to the operation of Eurostar during that period of congestion. On that subject, have the recommended engineering reports on the feasibility of moving the terminal from Kings Cross to St. Pancras been undertaken?

I have another question on timing. I refer to the timing of the payments of the government contribution to the project. It is not clear to me from the Statement how the payment of the major contribution of £1.8 billion will be staged. I should be grateful for some details on that.

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Finally, there is another problem to which reference has already been made. I refer to the balance of cost and benefit to the taxpayer of a share in the eventual success of LCR as opposed to the risk of backing a £3.7 billion bond issue. Can the Minister assure us that there is not now over-confidence in the eventual success of this project? I hope that that is not the case.

Having said all that, our first reaction is one of satisfaction that from the ashes of failure the Government have managed to construct something which looks as though it will be successful.

4.22 p.m.

Baroness Hayman: My Lords, I am extremely grateful to the noble Baroness, Lady Thomas of Walliswood, for ending on such a constructive note and for her welcome of a deal which has been produced after enormous effort by many people and which reflects a partnership in which the House and the country can have confidence.

I must advise the noble Earl, Lord Attlee, that he is absolutely right that there was criticism implicit in the Statement of the scrutiny by the last government of the contract into which they entered. I suggest that that criticism was well based, given the collapse that we have seen and what has had to be rescued over the past few months.

It is rather churlish to criticise this as an over-spun and over-leaked announcement. What I was listening to and reading this morning was not the Statement that I made to the House this afternoon. One does not have complete control over the press getting things wrong, but it is a little unfair to be blamed for the fact that they speculate.

I shall try to answer most of the specific points put to me and I undertake to write on any that I have missed. I was asked about what guarantees there are about the second phase of construction. That interrelates with the question of the timing of the payment of public subsidy, which was raised by the noble Baroness. The two are interrelated because it is in the incentives as regards the timing of the payments of public subsidy that we believe lies the strength of the incentive for the completion of the whole project through to St. Pancras. Approximately one-third of the public subsidy will be payable on completion of the first phase to Fawkham Junction. None of that money will be payable until two-thirds of that construction work is completed. That means that two-thirds of the public subsidy of £1.8 billion will not be payable until we have two-thirds of the construction of the next phase to St. Pancras. The House will understand that those are strong financial incentives. There are also strong financial incentives for Railtrack in having a complete link as soon as possible in terms of its return on its capital.

The noble Earl asked me about capacity at Waterloo. My understanding is that we are confident that there will be sufficient capacity at Waterloo for the foreseeable future. We do not believe that, even on the most optimistic forecasts, there will be any capacity constraints before the development into St. Pancras is completed.

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In an analogous question, the noble Baroness asked about the pressure that will be put on commuter lines into Waterloo. Once the Fawkham Junction section is complete, there will obviously be additional traffic on some of the lines into Waterloo, but I understand that Railtrack has undertaken to ensure that there are some improvements on that stretch of the line in the interim period before the complete link into St. Pancras is finished.

I was also asked about the forecasts of Eurostar business and passenger traffic, which are obviously key to this issue. As I said, those forecasts have been prepared for the Government by independent consultants in contradistinction to the previous government's acceptance of the over-optimistic projections provided by Eurostar. The Government's central case, on which the funding is based, forecasts for every year to 2010 10 per cent. less traffic than was implicit in LCR's forecast. Even on those lower passenger forecasts, this deal still stacks up financially. The House can be reassured that there is not the over-optimism that got us into this position in the first place.

The noble Earl suggested that the project would receive large amounts in public subsidy over and above the £1.8 billion and the possibility of an extra £140 million in subsidy which I have already explained with regard to Eurostar. In fact, the guarantees have been classified independently by the Office for National Statistics and vetted by the European equivalent agency. The Office for National Statistics has deemed that the possibility of the Government's guarantees as regards the bonds being called in is so remote that they do not score as public expenditure.

In view of the unique importance of this project, we have managed to provide a financing system which means that the project can be built at the least cost to the taxpayer rather than involving the taxpayer, as we were being asked to do originally, in £1.2 billion of extra expenditure simply to enable LCR to raise its money on the open market. I would have thought that the creation of a safe but innovative method to ensure that the link was built at the cheapest possible cost and the least demand on taxpayers' money would be something on which the Deputy Prime Minister and the negotiating team should be congratulated.

I described the consortium that would run Eurostar. A stake will be held by both the Belgian and French national railways. Those details are still being negotiated. I cannot say exactly what stake they will each hold, but I have made clear that the British Government will also have a stake and therefore public participation will be ensured. I hope that I have covered most of the points that have been raised, but I shall read Hansard and undertake to write to noble Lords if I have not covered particular points.

4.30 p.m.

Lord Ampthill: My Lords, I thank the noble Baroness for repeating the Statement but hope that she will forgive my disappointment about some of its

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contents. The Bill received Royal Assent 18 months ago. The intervening period has not been totally wasted inasmuch as the detailed plans have been completed. A start on construction could have been made 10 weeks ago but the money was not there. We are now faced with a completion date of 2007--four years later than contemplated and would have been achievable. The first phase is to stop at Ebbsfleet. Who other than those of us involved in this matter knows where Ebbsfleet is? The answer is that it is to be found in the top right-hand corner of Kent near the Thames. It is a wasteland and no one will wish to go there.

The proposed first phase appears to achieve a saving of a quarter of an hour in the Eurostar journey time from Paris and Brussels but virtually nothing else. The original concept had many more objectives: a saving of half-an-hour for Eurostar and, more importantly, the opening up of decent rail services for the people of Kent, using the new line, which would more than halve the journey time for commuters and others wishing to travel to London and beyond. It would also get Eurostar off the old, decrepit and clogged south-east network. A further benefit would be the provision of a gateway at Stratford East for the whole of the United Kingdom north of the Thames to gain rail access to Europe, whether it be people or goods.

I believe that there is little benefit in phase one on its own and a great deal of unpleasantness for those who live near the spur line from Southfleet to Waterloo--the people of Swanley, Bexley, Bromley and Beckenham--who were told by the Select Committee of this House that while there could be a brief period when the spur line might be overused because of the greater construction difficulties north of the Thames they would not have to put up with it for too long. They have been badly let down.

One suspects the dead hand of the Treasury in this unhappy compromise despite the kind observations in the Statement. Recently, there have been welcome signs that the Treasury has discovered the difference between capital and current expenditure. A huge infrastructure project such as this will never get done without heavy state help. PFI can go only so far. However, it is at last going to happen. Can the noble Baroness give the House some encouragement that her department will exert greater pressure to make a start on construction and urge a great deal more rapid completion?

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