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Lord Macdonald of Tradeston: My Lords, the amendments to Section 26 in Clause 211 are important provisions and I welcome the opportunity to explain them again.

To summarise, the Bill provides the assurance of a competitive process either by a formal invitation to tender at the expiry of an existing franchise or an equivalent process. This process must be flexible enough to deal with mid-term franchise replacement exercises such as that currently under way and to ensure that the trains do not stop running if there is no private sector response or an inadequate private sector response to competition. The amended Section 26 is the detailed machinery for this. It provides a safety net that spells out in detail what happens if the franchise process fails. There has to be a public sector capability to act as the operator of last resort.

I do not expect my words to dispel the Opposition's unjustified concern that the amended Section 26 is there to facilitate re-nationalisation by stealth, but I will try. The amendments in Clause 211 to the franchising procedures in Sections 23 to 30 of the Railways Act (addressed in Amendments Nos. 254 to 258), substantially maintain the current position under that Act. Among other things, the 1993 Act already enables the British Railways Board to compete with the private sector for franchise opportunities, and the Secretary of State to dispense with a formal invitation to tender exercise.

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So the provisions on last resort operation are written out in full to reflect the intended dissolution of the British Railways Board. They require extensive procedures to be followed before they can be activated and cannot be used with an intention to re-nationalise the railway industry.

Amendment No. 250 seeks to link the franchise designation process to the authority's last resort operating powers. In fact, the new powers to designate franchised services in Clause 211(1) and (2) are free-standing and have been amended to facilitate the process of franchise exemption. All currently franchised services will remain designated but the SRA will be able to revoke and replace existing designation to reflect, for example, modifications of the franchise map.

I am grateful for the opportunity afforded by Amendments Nos. 251 to 253 to speak to the intention of Clause 211(3) of the Bill. Noble Lords will know that the franchising director is currently in the process of negotiating replacement franchises of up to 20 years. The purpose of that is to secure better services and more investment sooner rather than later. Improvements are sought to safety, performance, customer service, innovation and investment.

He is doing so in an exercise which is very close in substance to the tendering process laid down in the 1993 Act. But there are upwards of three years to run on existing franchises and the franchising director cannot force an unsuccessful incumbent to hand over the keys to a franchised service before the expiry of the franchise term. Because of that, it can be argued that the process, although highly competitive, does not technically constitute an invitation to tender procedure as specified in Section 26 of the Railways Act.

Before letting a replacement franchise, therefore, the franchise director proposes to obtain a direction from the Secretary of State under Section 26 of the 1993 Act which allows him to award the replacement franchise without being at risk of an unsuccessful tenderer arguing that the process conducted by the franchising director was not compliant with Section 26. The instructions and guidance given to the franchising director in September 1999 anticipated a direction under Section 26(1) in the event of a successful franchise replacement exercise and directions have been given to the franchising director in respect of the Chiltern and South Central franchises.

We are not, therefore, amending Section 26 to give the Secretary of State any broad new powers, since he can already direct that the invitation to tender procedure be set aside. We are amending Section 26 because we consider that it could be improved and the process made more transparent.

For example, the process does not currently specify how the Secretary of State is able to exercise his powers of direction beyond dictating that the franchising director need not follow a tender process or set any limits on how the Secretary of State is to exercise the powers. We feel that the scope of his powers should be set out more clearly and so we iterate the various

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combinations of directions which the Secretary of State may give. We also provided that in future there should be a formal statement of the procedures which are to be adopted dealing expressly with franchise replacement.

That will help those who may be considering entering into negotiations for franchise replacement to understand how the Secretary of State and the SRA will exercise their powers to award an early replacement franchise. It is a substantial advance on the general power currently in Section 26.

I want to make it clear that it is not the intention to use that power to impose a franchisee on an unwilling SRA. But there are circumstances where a direction in those terms would be an appropriate method of concluding franchise negotiations; for instance, if a franchise replacement is identified as the likely recipient of a franchise, the logical outcome of a Section 26 direction might be that the franchise should be awarded to that person. But we do not want to prevent a satisfactory outcome by limiting the way in which it can be brought about.

I hope that explains the rationale for the amendments to Sections 23 to 30 of the Railways Act in Clause 211, and I urge the noble Earl to withdraw his amendment.

9.30 p.m.

Earl Attlee: My Lords, I thank the Minister for his reply which was as detailed as my speech in moving the amendment. I shall study the Minister's response very carefully. Sometimes when I study the noble Lord's replies I am persuaded by them, and for that reason I have not moved as many amendments at Report as in Committee. The noble Lord is very confident in his position and I do not believe that I shall be able to move him very far. Subject to the usual caveat, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 251 to 259 not moved.]

Clause 213 [Securing provision of substitute bus and taxi services]:

[Amendment No. 260 not moved.]

Clause 217 [Functions relating to Board's property]:

Lord Berkeley moved Amendment No. 261:

    Page 130, line 9, leave out subsection (4) and insert--

("(4) Any land required for the discharge of any of the functions of the Authority may be retained or disposed of at prices reflecting its transport use.").

The noble Lord said: My Lords, noble Lords will be aware that Amendment No. 261 is all about railway land in the ownership of Rail Property Limited which is transferred to the Strategic Rail Authority. I raised this matter in Committee and was interested in the reply of my noble friend Lord Macdonald. My noble friend confirmed that there was,

    "no statutory impediment to the SRA retaining land that has a reasonably foreseeable railways use".--[Official Report, 17/7/00; col. 741.]

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My honourable friend the Minister for Railways, Mr Keith Hill, suggested in the House of Commons that 20 years was a reasonably foreseeable timescale. I had the honour to become a member of the property advisory group of the SRA following Committee stage. That group also recommended to the SRA that 20 years was an appropriate timescale in which to look at the future need for land for the purpose of transport use. Considering that it takes at least 10 years to build a new railway--in the case of the Channel Tunnel Rail Link it will probably be 20 years--this is a reasonable timescale.

I was interested in my noble friend's statement that,

    "Clause 217 enables the Secretary of State to give the SRA a direction about how land that could serve a transport use other than railways is to be disposed of or otherwise dealt with by the SAR".

I am not clear whether that is a general or specific direction. Following the response of my noble friend Lord Whitty to a previous amendment, I am not sure whether that direction is to be made public. My concern is that a piece of land may be seen to be of use for, say, a station car park or rail freight terminal in five or 10 years' time. If a supermarket offers £5 million for the site, whereas it is quite clear that for transport use it is worth only £1 million, will the SRA regard £1 million as acceptable and allow the land to be sold to a transport operator for that sum? If so, does the SRA have to seek the approval of the Secretary of State or will it be allowed to take such action on its own?

Another possibility alluded to by my noble friend in Committee is that the SRA may have to sell it for £5 million and then make a grant of £4 million to bring down the value of the land to £1 million for transport use. It is all a bit messy. This probing amendment is one last attempt to clarify the position. I beg to move.

Lord Freeman: My Lords, I support the noble Lord's amendment. The crucial point here is that in order to make a judgment about whether a car park, old freight yard or maintenance depot will be of use to either a freight or passenger railway in future one must have a strategic plan. That is the only way in which one can judge whether the property is likely to be needed. I agree with what the noble Lord said about time frames. When one considers the planning for the Channel Tunnel rail link or even the upgrading of the West Coast main line, 20 years goes in a flash. Therefore, I strongly support the noble Lord. Noble Lords will be interested in the Minister's response about matching the requirement to judge the value of a piece of land against the plan of its possible need.

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