4th REPORT: LIBERALISING RAIL FREIGHT
MOVEMENT IN THE EU
Department for Transport's Response
INTRODUCTION
The Government is grateful to the Committee
for its thorough report on liberalising rail freight movement
in the European Union (EU). The Government supports the opening
up of both the international and domestic rail freight sectors
to competition on an equitable basis. The Government considers
that experience in Great Britain clearly demonstrates the benefits
accruing to freight users and operators from liberalised access
to the rail market. The Government is pleased that with the adoption
of the Second Package of EU Rail Directives a legislative framework
now exists for full market liberalisation, which provides for
full market opening for international freight services by 1 January
2006, and for all freight services by 1 January 2007.
An independent study[1]
has found that the rail freight market in Great Britain is the
most liberalised in the EU, notwithstanding the delay in transposing
the provisions of the First Package of EU Rail Directives into
domestic law. Work is now in hand to transpose the First Package
of EU Rail Directives, including some elements of the Second Package
of EU Rail Directives to open up domestic freight markets, by
the end of this year. However, the Government does not anticipate
that transposition will have a significant effect in Great Britain
given the substantial liberalisation of this industry already.
In the following paragraphs we set out the Committee's
recommendations and the Government's response to each of them.
RESPONSE TO
RECOMMENDATIONS
94. The Commission must first and foremost
ensure that the First Railway Package is fully implemented across
the EU-15. The 10 new Member States may need longer to implement
the legislation but the Commission should work with them to ensure
compliance as soon as possible. (para 68)
95. The Commission must maintain pressure
on Member States to ensure they implement this package. (para
79)
As the Report recognises these recommendations
are matters for the European Commission. The European Commission
has stated that it intends to be vigorous in ensuring the full
implementation of the First Package of EU Rail Directives, and
that it will scrutinise very carefully Member States' notified
implementation measures. In terms of the accession states the
European Commission has specific programmes to support them in
their implementation of EC rail legislation.
96. Further consideration should be
given to requiring Member States to put rail infrastructure and
freight operations into separate companies. (para 24)
Requiring Member States to put rail infrastructure
and freight operations into separate companies would require new
legislation. It is for the European Commission to propose any
new legislation it considers appropriate. The UK would examine
any such proposal on its merits, and would expect that to be accompanied
by evidence of the increased effectiveness of more stringent requirements,
but the Government would not expect it to have any impact in Great
Britain.
97. We accept that the requirement that
rail freight operators should be at arms length from the infrastructure
managers and that their funding should be completely transparent
may be the best alternative to complete separation. But we believe
it is important that track access should be regulated and appeals
concerning the conduct of the infrastructure manager should be
heard by an independent regulator. (para 81)
The First Package of EU Rail Directives requires
this already. In Great Britain the Office of Rail Regulation (ORR),
as the independent rail regulator, is responsible for regulating
track access and dealing with appeals against decisions made by
Network Rail, as the infrastructure manager. Transposition of
the First Package of EU Rail Directive will extend the areas of
appeal to areas beyond the existing domestic requirements such
as how the infrastructure manager calculates its charges. The
ORR has been active in sharing our experience of track access
regulation with colleagues in other Member States.
98. We believe that the relevant legislation
should be amended to make it clear that each Member State requires
an independent rail freight regulator, independent from the Government,
with appropriate powers and resources and tasked with ensuring
fair and open assess to the rail freight market. (para 84)
The ORR is the independent rail regulator in
Great Britain for both passenger and freight operations. It is
for the European Commission to propose any new legislation it
considers appropriate. The UK would examine any such proposal
on its merits, and would expect that to be accompanied by evidence
of the increased effectiveness of more stringent requirements.
100. Implementation throughout Europe
of a charging system reflecting the full costs of road freight
transport is urgently needed to ensure that rail is able to compete
with road on equal terms. (para 48)
The Government was disappointed that the European
Commission's proposal to revise the existing EU legislation governing
lorry charging (the `Eurovignette' Directive 1999/62/EC) was not
based on the principle that lorries should pay the full costs
they impose on society. This is the approach the Commission had
signalled in its 2001 European Transport Policy White Paper (COM(2001)
370 final). In negotiations in the EU Transport Council, the UK
has argued that member states should be free to internalise external
costs in charges. But there has been overwhelming opposition particularly
from peripheral member states which fear adverse economic consequences
from high tolls levied by transit countries.
On 21 April 2005, the Council reached a political
agreement on the proposal. This would not allow member states
to include external costs in any charges imposed on lorries; although
it would provide considerable flexibility for charges to be varied
for purposes such as combating environmental damage and tackling
congestion. The Council's position will now go to the European
Parliament for 2nd Reading. At 1st Reading, the Parliament sought
to amend the European Commission's original proposals to allow
for the inclusion of external costs in charges. It is too early
to say how the differences between the Council's and Parliament's
positions might be resolved.
102. The Government of the United Kingdom's
first priority in relation to rail freight must be to implement
fully the First Railway Package as soon as possible. (para 85)
The Government is giving priority to this implementation
project. Our current intention is that the First Package of EU
Rail Directives, and the elements of the Second Package of EU
Rail Directives to open up domestic freight markets, will have
been fully transposed by the end of this year. We intend to have
a public consultation on our proposals to transpose the First
Package of EU Directives in June. The Government does not anticipate
that transposition will have a significant effect in Great Britain
where the network is already liberalised.
103. The Government must continue to
work with the rail freight industry to identify those rail routes
that still require an upgraded loading gauge. (para 92)
The Government has made good progress in identifying
where loading gauge enhancement is a priority, and in November
2004 the Strategic Rail Authority (SRA) set out its proposed priorities
in its Gauging Policy Consultation Document.
The Felixstowe-Nuneaton gauge enhancement was
completed on time last year at a cost of £30 million. The
SRA and industry have done good work to produce a value-for-money
proposal for gauge enhancement between Southampton and the West
Coast Main Line, and the Government is now considering next steps
with the industry.
Network Rail has recently announced they will
be developing a national Freight Utilisation Strategy as a key
strategic input to their work on Route Utilisation Strategies,
which consider capacity usage across different parts of the network.
The Government welcomes this and will work with the rail freight
industry and Network Rail to try to ensure that there is a shared
understanding of the expected nature and level of growth in the
rail freight market and of its impact upon the network.
104. We urge the United Kingdom Government
to continue to resist requirement of a full international rail
drivers' licence for all train drivers. (para 54)
The Government will continue to resist such
a requirement. The `General Approach' reached by unanimity in
the December 2004 Council meeting includes a provision where,
on application by a member state, a decision can be taken that
the Directive should not apply to that member state's domestic
train drivers should a cost benefit analysis prepared by the European
Rail Agency show that its application to such drivers would not
be cost-beneficial.
105. We recommend that Regulation COM
(2004) 144 should permit an opt-out from a compulsory compensation
regime and that the United Kingdom Government should support this
recommendation. (para 33)
The Government shares the objective of the proposed
Regulation—to improve rail freight performance. However,
we are not convinced that even with this opt-out the Regulation
will do anything to achieve that.
The Regulation would bite where, because of
the absence of effective competition, the customer was unable
to secure a compensation regime better aligned to his needs. But
it is precisely in those circumstances that the train operator
could most readily just pass on the costs of complying with the
Regulation to the customer.
The Government remains of the view that the
most effective way forward for the present is to ensure the effective
implementation of the liberalisation measures already agreed,
which will see the international rail freight market completely
open by January 2006, and the domestic market by 2007.
106. We urge the Government to work
with the French Government to ensure fair and open access through
the Channel Tunnel. (para 90)
107. Given the complex contractual position
surrounding the Channel Tunnel, the issue of compliance with the
First Railway Package in respect of the Channel Tunnel is itself
a complex one, but one which the British and French governments
need to address if international rail freight services between
the United Kingdom and continental Europe are to meet the needs
of British industry and commerce. (para 65)
The Government is currently working with the
French Government on the transposition of the First Package of
EU Rail Directives for the Channel Tunnel, with the aim of completing
transposition by the same date—end 2005—as for the
rest of GB. The right of access for new entrants through the Channel
Tunnel has existed since the Tunnel opened.
Eurotunnel is ready to make train paths available
to new entrants. Eurotunnel's network statement—available
on its website—sets out the relevant procedures and conditions.
108. A way needs to be found urgently
of securing competitive access charges to the Channel Tunnel so
that the rail freight industry as a whole can compete on equal
terms with the freight ferry industry across the Channel. (para
66)
The provisions on access charges in the First
Package of EU Rail Directives allow Eurotunnel, as infrastructure
manager, considerable flexibility on charging. Within that broad
framework Eurotunnel's access charges are a commercial matter
for this private company and its customers. Eurotunnel operates
in a highly competitive cross-channel market, and is subject to
normal market pressures.
109. We applaud the Rail Net Europe
initiative and the European Bull alliance. We hope that the Commission
and the United Kingdom Government will do all that they can to
help them to succeed. (para 78)
The Government welcomes these initiatives. The
European Commission's Developing European Railway Committee, on
which the UK and other Member States are represented, follows
market developments closely and is taking forward complementary
initiatives, such as establishing common criteria for how regulatory
bodies will act, and co-operate in considering appeals relating
to international train paths.
Letter from the Chairman to Derek Twigg MP,
Parliamentary Under-Secretary of State, Department for Transport
Thank you for the Government Response to the
Committee's report, Liberalising Rail Freight Movement in the
EU which Sub-Committee B considered at its meeting on 4 July
2005. Members were pleased to note your positive comments regarding
most of the Report's recommendations.
We share the Government's disappointment that
the "Eurovignette" Directive was not based on the principle
that lorries should pay the full costs they impose upon society.
We understand that the disagreement between the Council and the
European Parliament on this Directive has not yet been resolved
but we would appreciate further updates from you as the situation
develops.
The Government's intention is that the First
Railway Package and the elements of the Second Railway Package
which aim to open up domestic freight markets will be transposed
by the end of this year. The Government intended to have a public
consultation on the proposals to transpose the First Package of
EU Directives in June. Did this take place? What was the nature
of consultation? Who was consulted? When will a report of this
consultation be available? If the Public Consultation is only
to happen in June, will transposition by the end of the year really
be possible or might this be an overly ambitious target? Once
the results of this consultation are available, the Sub-Committee
would be very interested to see them.
We are pleased that the General Approach on
the international rail driver's licence includes a provision for
domestic train drivers to be excluded (should a cost-benefit analysis
prepared by the European Rail Agency show that its application
to such drivers would not be cost-beneficial). We welcome your
commitment to resist the extension of the international rail driver's
licence to all rail drivers.
We remain convinced that some kind of a compensation
regime for freight customers should be introduced. We recognise
your concerns that the cost of this would be passed on directly
to the customer but the evidence we received, from rail freight
customers amongst others, leads us to believe that the unreliability
of rail freight services is a serious issue and that a compensation
regime with an optional opt-out on the part of customers would
be the best way to address it.
Your response to our report states that, "Eurotunnel
is ready to make train paths available to new entrants".
Whilst we accept this, you seem to take no account of the fact
that EWS currently pays no access charges to the Channel Tunnel
(because of a deal agreed when British Rail was privatised) but
any competitor would have to pay the access charges advertised
on Eurotunnel's website. We also have concerns about the Minimum
Usage Charge (paid by the residual British Railways Board) which
guarantees Eurotunnel a certain level of income even if traffic
levels are below a certain minimum level. This means that Eurotunnel
is competing from a subsidised and protected position. In your
evidence to us, you said that the extension of these subsidy arrangements
to the end of 2006 would provide a breathing space whilst further
liberalisation is sought. Will the current arrangements whereby
the Minimum Usage Charge applies continue after 2006?
The Sub-Committee has also decided to maintain
the scrutiny reserve on the remaining documents comprising the
Third Railway Package 7170/04, 7147/04, 7148/04 and 7150/04
8 July 2005
1 The IBM Rail Liberalisation Index 2004 by IBM Business
Consulting Services. Back
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