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Lord Berkeley: My Lords, my name is added to this amendment. I shall not detain the House because the noble Viscount has set out very succinctly the purpose of the amendment. It would protect train operators, including freight—I declare an interest as chairman of the Rail Freight Group—against government action that adversely affects their business. It is quite simple and is quite a normal principle.

On Monday, at Report, my noble friend basically made two points. The first was that this matter could be resolved by using the network code, which was prepared and run by the independent Office of Rail Regulation. Comfort should be taken that this office was independent. The second point was that the Government did not like to see the word "compensation" in the Bill.

Perhaps I may remind the House that on both those issues the recently published Crossrail Bill does precisely what my noble friend said should not be in this Bill. The Crossrail Bill seeks to fetter very significantly the independence of the rail regulator by allowing the Secretary of State to instruct or direct him to give priority to one group of train operators over another, which would very seriously and adversely affect those who might have to have their access contracts changed. If one accepts that, it is reassuring that the Government have chosen to put in that Bill the fact that those people adversely affected should be capable of receiving compensation.

So compensation is accepted for Crossrail, but it is not apparently accepted for the rest of the railway. Even more seriously, it demonstrates that one cannot rely long-term on the Government accepting that the rail regulator office should remain independent, which is one of the absolute foundations of the private railway network today. Whether people like privatised
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railways or not, that is what we have. The Office of Rail Regulation ensures that private sector interests, which have invested billions in the railways, should be able to enjoy the benefit of their investment without subsequent interference from the Government.

Both of the arguments put forward by my noble friend should be treated with caution if the Government are prepared to change them so soon. This amendment is a very important part of the comfort that private-sector investors in the railways need if they are to invest with confidence in the future.

Lord Bradshaw: My Lords, I am pleased to associate these Benches with the remarks made by the noble Viscount, Lord Astor, and the noble Lord, Lord Berkeley. We are very keen that nothing should stand in the way of people's appetites for investment. That applies particularly to the freight sector, which, as I said at Report, is so vital and for which—I do not expect to treatise on that now—the Government have done very little to deal with the huge problem of congestion on the roads. I am pleased to support the amendment.

Lord Davies of Oldham: My Lords, I am grateful to noble Lords for their contributions to this debate on an issue that we considered in more general terms probably at Report stage. I congratulate the noble Viscount, Lord Astor, on having refined his amendment and for concentrating his comments on the real issues at stake.

I am well aware of and, of course, understand the concern of the train operators regarding the potential impact of any future access charges review on their businesses. I recognise the validity of concern expressed by all three noble Lords who have contributed to this debate.

As we have stated previously, the Government are keen to provide operators with the certainty that they will receive mitigation or compensation should their businesses be affected by these processes. We have made public an exchange of letters between the Secretary of State and the Office of Rail Regulation to that effect. So the debate on the amendment comes down to clear points of principle.

First, we believe—not, as I think was suggested, that compensation should not be offered in proper circumstances—that compensation and mitigation are matters which should be dealt with through the access contracts. That is why we continue to work with the industry to ensure that access contracts and the network code deal as effectively as possible with these issues. If we accepted the amendment, it would bring legislation into an area where the existing contractual arrangements are working well and are clearly understood by the parties. It would be wrong to do this in principle and would set a dangerous precedent that could undermine the commercial stability sought by private sector operators and investors, which was the burden of the remarks made by all three noble Lords.
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But the second point of principle is one which I sought to emphasise on Report. Again I address it to all parts of the House, but I suppose that I am bound to address it particularly to my noble friend. It is for the Secretary of State and for Scottish Ministers to determine how much they are willing and able to spend in support of railway services. No statutory requirement should be added to that budget subsequent to their decisions. While I recognise my noble friend's defence of the interests he represents so ably—he has every right to do so—I ask him to accept that we are debating this at a point when the nation is about to decide in a general election who should be its representatives, and that Members of the other place are now putting their own positions on the line. I also ask him and other noble Lords to consider whether it is right that a budget established by the Secretary of State and Scottish Ministers in their area should be increased by statute in circumstances over which they would have no direct control. Surely that goes against the fundamental democratic position of accountability. That ought to be borne in mind by all of us in this House who do not have to stand for election in order to reach our judgments on this issue, one that concerns funding and resources for which the Secretary of State and Scottish Ministers are responsible.

I turn to the second argument put forward by the noble Viscount, Lord Astor. This refined amendment would come into effect only in limited circumstances and would cover only the difference between what would be paid under the contract and what is adequate so that the risk to the Government is not that great. I would argue that we do not know what the risk would be. The amendment establishes the principle that the Secretary of State is open to having his budget extended, and we do not know what the circumstances might be and therefore the sums involved in terms of compensation.

Lord Berkeley: My Lords, I am grateful to my noble friend for giving way. I accept that no one wants the Secretary of State to have a blank cheque. That would be totally stupid. What the amendment is trying to do is suggest that if there is a problem with the overall budget—and these situations do not arise overnight—compared with what the Secretary of State wants to buy in terms of services, he has various options. He could cut the passenger services he is buying, or he could reduce the state of the network so that non-passenger, non-franchise services incur higher costs. He could do any of those things. However, if these companies then incur higher costs, he could include in his budget a contingency for compensation.

The Secretary of State does not need to increase his overall budget. He needs only to recognise that there may be a justifiable claim for compensation and therefore he needs to include in his budget a contingency for meeting such a claim. I suggest to my noble friend that there is no question of the budget having to be increased ad infinitum because of an open-ended claim of the type he suggests.
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Lord Davies of Oldham: My Lords, my noble friend must be a little careful with the concept of contingency funding. I can think of certain expenditures from the contingency fund of hugely significant proportions for government, so I am not sure that that concept can be translated to legislation in quite the rather facile way he suggests.

We maintain that the contracts should be signed and the work done on the basis of understanding aspects of risk. Built into that is proper consideration of when things might go wrong. But the idea of having a kind of sinking fund created by the Secretary of State with taxpayers' money available to be dipped into and shelled out under ill defined circumstances is one that I am surprised to see my noble friend supporting. But I am even more surprised that the Conservative Party, on the brink of a general election in which they are spending so much time showing how proper their candidates must be about public expenditure plans, is actually promoting an amendment that is an open-ended demand on a Secretary of State.

I hope that the noble Viscount will recognise the wisdom of withdrawing his amendment and accept that the Government's provisions adequately meet the situation.

Viscount Astor: My Lords, I have to say to the Minister that that was a good try, but this amendment does not in any way increase public expenditure. He knows that, I know that, and the noble Lords, Lord Berkeley and Lord Bradshaw, know it. But the Minister has to stick to his brief and we sympathise with him.

The noble Lord has talked about principle. We know already that the Government have accepted the principle of my amendment because they have published it in the Crossrail Bill, a point made by the noble Lord, Lord Berkeley. The ORR is independent and I hope that it will remain so, but I remind noble Lords that the Strategic Rail Authority, created by this Government in 2001 and which was supposed to be the answer to managing the rail network for the future, is to be abolished by this Bill. We do not know what is going to happen.

The important point is that the Bill will allow the Secretary of State to change the circumstances in which the contracts were originally negotiated by the private sector. My amendment would ensure that if the Secretary of State does change those circumstances, he will not unfairly penalise those who have signed contracts with the Government. That is an important principle. If the Government do not accept it, it will affect every future contract in the private sector signed with any department. All of them could just be changed.

My amendment does not increase public expenditure and has nothing to do with increasing the Secretary of State's budget. It is a simple protection measure. I am disappointed that the Government will not accept it and, while I understand the Minister's position, I wish to press the amendment to a vote.
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4.20 p.m.

On Question, Whether the said amendment (No. 8) shall be agreed to?

Their Lordships divided: Contents, 158; Not-Contents, 135.

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