Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Whitty: The Chantrey Vellacott report, never mind the somewhat scaremongering headlines which emanated from it, is based on a misapprehension; that misapprehension primarily arising from the notion that the whole of the £7 billion of additional investment that one wants in the underground network would come from up-front borrowing. Clearly, some of it would come from the income of London Underground in normal circumstances and from efficiency savings contributing to that. There is not a presumption that all of that would be raised from the market. That is what led to the differential fares implication being drawn by Chantrey Vellacott but it was based on a serious misapprehension.

The amendment would run counter to our giving the flexibility to the mayor to decide what the wholly appropriate levels of fares should be. It offers a very prescriptive indication of fare levels, increasing them by RPI minus 2 per cent until 2002, and by RPI minus 1 per cent thereafter. The mayor must have some flexibility in this regard, and TfL may well want to vary the rate at which fares are increased, or indeed the frequency with which they are increased. This kind of provision is therefore not very sensible.

As to the more general speculation, irrespective of Chantrey Vellacott, that the cost of the PPP would be loaded onto fares, that is completely the wrong impression. It is based on a misconception that fares will have to increase substantially to cover the costs identified in the report and in some of the newspaper coverage.

The substantial savings which London Underground will be able to make through having stable long-term investment programmes that it has not hitherto been able to make when it has had to compete with other public sector demands will be a major contribution to a stable fares situation. That is not achieved by prescription from above, because the mayor will need to make a judgment, based on TfL's corporate planning, as to what the level of fare increase or fare structures should be. That responsibility should rest with the mayor.

Lord Clement-Jones: I thank the Minister for that response. However, this probing amendment is an attempt to get to the nub of the Government's assumptions in regard to the PPP. That is why I tabled the amendment specifically in relation to the relevant PPP clause.

A great deal of confusion seems to have been raised in the minds of Members in Committee about the Government's assumptions, and the assumptions of London Underground, about the fare rises which were anticipated and which formed the basis of the assumptions about the success or otherwise of the PPP. At one stage, the Minister for Transport in London said that, as in the London Underground paper published in March, a figure of 1 per cent above the rate of inflation was a valid assumption for the revenues of Transport for London. But, shortly afterwards, that statement was

1 Jul 1999 : Column 565

retracted. Yet it had appeared in the London Underground paper. The transparency surrounding those assumptions is extremely important when people are looking at the future and in particular at the proposed PPP scheme.

Lord Whitty: There is a confusion between reasonable presumptions that may have been made in certain contexts at various times and what the final negotiated settlement of the PPP will be. Clearly, built into the final package will be some presumption of underlying changes of fare. But that is by no means determined. We need to look at the nature of the negotiations for the PPP before we arrive at that point. But, even without any of those figures as regards the underlying trend, we should still want to leave considerable flexibility to TfL and the mayor thereafter as regards annual increases in fares, the structure of fares and the frequency of fare increases. Therefore, specifying figures that relate to the RPI for annual increases is not very sensible. It is a very constraining approach. The allegations that the cost of borrowing would be wholly loaded on fares was, as I have said, based on a wrong assumption of how much of the additional investment requirement would be met from new borrowed funds.

Lord Clement-Jones: I am sorry to press this point, but it is very important. There has been a great deal of debate. With respect, the Minister has not yet explained why the Minister for Transport in London mentioned the figure of 1 per cent above the level of inflation and, for instance, why London Underground mentioned the 1 per cent figure in its paper.

I can well understand that assumptions shift from time to time, and when the Government finally goes nap on a PPP proposal, a different set of fare rise assumptions may take place. But it was my understanding--and having read Hansard it seems crystal clear--that the Minister for Transport in London mentioned a figure of 1 per cent above the rate of inflation. I do not understand why that figure was mentioned if it is of no relevance at all to our debate.

Lord Whitty: I do not think it is of relevance to our debate on these clauses as regards what powers and restraints it will place on the mayor. Clearly, London Transport have to make certain presumptions about the underlying rate of price increases. In the circumstances, that presumption, had nothing changed, may have been a reasonable decision for London Transport, but it is not a reasonable indication of what the outcome of the PPP would be.

Lord Clement-Jones: I thank the Minister for that reply. I shall not press him any further. However, I feel that the situation is unsatisfactory. The whole architecture of PPP is based on certain economic and financial assumptions. Absolutely central to those assumptions are matters like the rate of fare increases. I shall read Hansard to see what the Minister has said. That underlying reality, which may shift from time to time, is of great importance. I believe that some

1 Jul 1999 : Column 566

reassurance to the general public would be extremely useful. As the Minister has said, there have been a number of scare stories. I do not necessarily believe that one needs to attach great credence to the Chantrey Vellacott report, but we have a wide range of estimates about the effect of PPP which need allaying. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clement-Jones moved Amendment No. 280XA:

After Clause 167, insert the following new clause--


(" . Before any PPP agreement is entered into the Authority shall be required to have satisfied itself that any such PPP agreement meets the requirements of European Union tendering rules.")

The noble Lord said: Amendment No. 280XA carries forward the debate started earlier this week at Question Time when my noble friend Lady Ludford asked about the scope of European Union tendering rules. On Tuesday, in reply to my noble friend, the Minister appeared to be adamant that PPP contracts would come under Part B of the utilities directive and the regulations made under that directive and that, therefore, the full European competitive regime for tendering would not apply. Hence, the possibility of only a single bidder for these sub-surface lines.

As my noble friend made clear, only operating services for rail fall into Part B. The infrastructure is the subject of the PPP and that surely constitutes engineering works for the purposes of the regulation. In that event, the tendering process needs to be on a competitive basis unless there are specific reasons for it to fall within the restricted or negotiated procedure. Currently, I cannot see any grounds for exclusion in the regulations. I have read them fairly carefully over the course of today.

Can the Minister confirm whether, since Tuesday, he has been able to take further counsel on this matter? Is there a written legal opinion on the subject? If there is, will the Minister publish it? I beg to move.

Lord Whitty: The noble Lord will know that it is not the normal practice for departments and government Ministers to publish legal advice, and there is no particular reason to depart from that in this case.

We have had consistent views that such services would fall under Part B and, therefore, would be excluded from the full competition requirements. There are certain marginal areas, but if the main services fall under Part B, they are excluded. Clearly, we intend to abide by the European tendering rules and where any doubts are expressed we would need to consider them before we proceeded. We are in a defensible position in that the content of any such contract--this applies to all three potential contracts and not simply the Railtrack one--could be deemed to be outside Part B of the regulations.

I do not know what more I can say to the noble Lord. That seems to us to be the position and we do not believe that it conflicts with the European legislation.

1 Jul 1999 : Column 567

12.15 a.m.

Lord Clement-Jones : I thank the Minister for that reply. I still have doubts, having read the regulation. The companies are referred to in short as infraco. They deal with infrastructure, not rail services, which the operating companies provide. I suspect that the department may be optimistic. It would be unfortunate if it was subsequently discovered that the department was not complying with the regulations.

I hear what the Minister says. No doubt further advice will be taken on all sides. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Next Section Back to Table of Contents Lords Hansard Home Page