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We are faced with a Bill that makes minor changes to the underlying legislation, with the objective of providing an optimal environment in which to restructure the rail link into three sustainable constituent businesses. The ostensible aim is to secure the best value for taxpayers when these elements are sold. Before the minutiae of the Bill are explored, it is important to mention how pertinent solid and effective legislation is to the rail link. It is evident that the end product that we can admire today is in many ways the result of the vital rescue package that was required soon after the Act was passed. The vastly overoptimistic passenger
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Clause 1 introduces no new provisions; rather, it simply clarifies a point that could suffer from ambiguity. However, the Government think it necessary to restate,
as they say in the Explanatory Memorandum, that the Secretary of State may fund High Speed 1 and the trains that operate on it. We are told that this is necessary to secure the best price during bidding. I do not quite understand that. I understand that the Railways Act 2005 allows funding for any part of the rail network, including High Speed 1. I therefore see the benefits of domestic services on the line being subsidised in the same way as the rest of the network under Network Rail, but surely the 2005 Act covers that.
Moreover, from reading Hansard from another place, I understand that, aside from domestic service subsidies, the intention is not to fund the line in any regard, and to provide only short-term support for Eurostar (UK) Limited. If this is the case, why cannot the clause be tightened to reflect this intention? The answer so far has been that doing so would preclude offering historic support to Eurostar in the short term. If the ultimate aim is to make Eurostar financially sustainable in the long term, why cannot this be written into the Bill? We shall have to explore this in Committee. Perhaps a drafting that excluded the direct subsidising of non-domestic services, exempting any historical support, would suffice. An acknowledgment in the Bill that the intention is to subsidise only in the short term, during a potentially volatile period, would provide reassurance. The wording of the clause is already rather unusual, so adding this caveat would not prove to be too exceptional. As I said, I am sure that we will explore this further in Committee.
Clause 2 removes further the power of the Office of Rail Regulation to approve access contracts for High Speed 1. The 1996 Act provided for domestic train operating companies on the line to be immune to the normal procedure in the Railways Act 1993. Instead, the development agreement requires the Secretary of State to oversee access contracts. This is the case for all the line, except, importantly, where High Speed 1 crosses any part of the national rail network and where the ORR still oversees access contracts. The Bill removes these exceptions and any potential duplication between the two regulatory regimes. I certainly see the benefit of avoiding dual regulation. I understand that High Speed 1 is a new asset and is therefore not subject to the economic regulation and the reviewed access charges of the rest of the national network, but are there any other advantages in creating a regulatory exception for this line? One possible advantage is that international services could be required to make full use of the High Speed 1 asset.
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There has been much discussion in another place of imposing terms on operators to stop at the new Stratford International station, which will be very well connected to different parts of the national rail network. I live in the east of England, and I very much support that.
I understand that international operators are on open-access contracts. Having looked at the consultation documents regarding the charging framework, it seems that the charging regime will be priced so as to not discourage the use of intermediate stations. Can the Government do anything else to help ensure that the full potential of the asset is realised? As the Minister said, the regeneration potential of the line was key to the routing, which I hope will continue to be borne in mind when thinking about international lines.
On Clause 3, the 1996 Act gives an “overriding duty” to the ORR,
- “to exercise his regulatory functions in such a manner as not to impede the performance of any development agreement”.
The Bill proposes to remove the sections of this clause which pertain to the construction of High Speed 1, which are now irrelevant, but seeks to retain the development agreement as the rail regulators overriding consideration. The example used in another place of why this is still necessary is to prevent train operators running to the Channel Tunnel on the domestic network and undermining the purpose of High Speed 1 as a result. Is that likely? Are there any other convincing reasons why this clause should be retained and priority of attention given to High Speed 1 over other parts of the rail network? I understand that the line is rather different from the rest of the rail network, but are there commercial benefits to treating it in a different manner?
The final substantive clause allows the Office of Rail Regulation to charge fees for its duties. As mentioned, the ORR’s duties are much less than those that it holds over the national network. The clause is in place if and when the need for the ORR to get involved becomes apparent. I understand that an example of such a scenario could be during a dispute between a rail operator and the line owners. The ORR also has health and safety duties. Would it be possible to make a charge for these, or are they excluded along with the competition aspects of the regulation? I was pleased to see that this clause was modified sensibly in another place to ensure that any charges represent costs reasonably incurred, which provides a degree of objectivity to any charge imposed.
This is a very complicated, technical Bill and I have tried to highlight some of the questions about which we are concerned. But there are several other issues which, although are not explicitly covered in this amending Bill, relate directly to the Channel Tunnel Rail Link. Waterloo International station ceased to operate Eurostar services when St Pancras took over and has five platforms vacant as a result. I understand and have read all the arguments against facilitating their usage in the short term. However, there was plenty of time in the interim period for the Government to address, or at least acknowledge, some of those issues. Instead, we are now faced with the prospect of major works on the crossover at Clapham Junction and on the heavily congested throat of Waterloo station,
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Of course, the original intention was for international services to run from Waterloo and St. Pancras stations, a decision which was overturned rather late in the process. Why were the reasons against this not thought through in the first instance? Perhaps we would be in a more optimistic position than being able to offer only platform 20 for conversion in the near future. Given that the Waterloo situation is a direct result of the Eurostar legacy, would it be possible to use some of the money raised from the sale of High Speed 1 to address the issues at Waterloo and make one of the busiest stations in the country more useable?
International services on High Speed 1 are subject to open-access contracts, and I would very much like to see a degree of competition on the line. Will the Minister be able to comment on the likelihood and feasibility of competing services being launched, and on whether on the French side of the Channel Tunnel there is sufficient free capacity? It is all very well describing contracts as “open-access” but is a degree of competition possible in reality?
In High Speed 1, we finally have an asset we can be proud of, with the benefits for passengers and regeneration potential enormous. We need to ensure that this Bill is sufficiently well drafted for High Speed 1 to continue in this vein. As I have said, this is a very technical Bill and I have tried to put forward some of the problems. For those reasons I look forward to being involved as the Bill progresses through the House.
3.29 pm
Lord Bradshaw: My Lords, we understand why it is necessary to confirm that the Secretary of State is empowered to fund the continuing operation of the Channel Tunnel Rail Link so that trains may run after construction and to remove any confusion which may exist, and to which the Minister referred, as to whether the state has the power to finance domestic operations as well as international trains. I believe it has been suggested that lawyers have found issues to raise which may be expensive to resolve without this legislation.
As we understand it, there are four separate businesses: the property business, with which we need not concern ourselves; the high-speed link itself, which is an infrastructure business; Eurostar, which is an unincorporated business owned by the three Governments; and the domestic trains, where the Secretary of State has already purchased 40 per cent of their capacity and which are due to commence operations shortly. High Speed 1 will own the infrastructure, so my first question is who might that be? That is, who will the Government sell it to? It could be sold to Network Rail, which could raise the money by selling bonds, enjoying as it does the advantage of those bonds being backed by the Government and probably able to borrow money more cheaply than anybody else. It could be bought by Eurotunnel, which has the incentive to tackle both
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At present, the charges for using the Channel Tunnel Rail Link are something over £2,000 per train, and I believe that that is somewhere close to the market price, the point at which you get more people using the service and therefore more revenue. If you charge more, fewer people will use it and there will be less revenue. Are these charges likely to be increased, and who would give consent to any increases that might be introduced? Alternatively, will there be no cap, and will there be a right of appeal about the charges being levied? If there is an appeal, who will it be made to?
I turn to freight and open access passenger operators. What charges will they be subject to, and will they be open to appeal? At the moment on British Rail, an open access freight operator pays only marginal costs, and the same is true for an open access passenger operator. Who would hear an appeal against the level of charges, and would the charges be subject to European law?
Is it the intention to sell the debt attached to the high-speed line with the assets themselves, or would the removal of the guarantee by the Government, which has been given to the operator of High Speed 1, offer it more freedom? If the Government were to offer some sort of cover for the debt, would it make the operator more or less free? What effect do the Government think this will have on the price realised from the sale? What underlies this Bill is the fact that the Government want as much money as they can get. The words are slightly more elegant than that, but basically they are out to get the biggest bang for their buck that they can.
Will the Government commit themselves to a review of the restrictions imposed by the Intergovernmental Commission on the Channel Tunnel? Why are these restrictions drawn in such an onerous fashion? For example, the latest intercity express of German railways can go through tunnels in the Alps which are much longer than the Channel Tunnel but it cannot come through the Channel Tunnel itself. These restrictions, I believe, originate in a treaty, but treaties may be rescinded by the consent of both parties. How close is the intergovernmental commission to being a restraint on trade? If the Swiss can allow trains to go through their tunnels, or the Danes and the Swedes can allow trains to go over their bridges, is this intergovernmental commission a restraint on trade? If so, is it bordering on the illegal? How do the present financial arrangements fit in with the review of state aid for infrastructure which I understand the European Union is currently considering?
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There are many more questions but the basic one is whether it is the intention of government to see that the Channel Tunnel Rail Link is used to the maximum extent possible so that more people benefit and carbon dioxide emissions from aircraft are reduced to the minimum. This is an asset which the taxpayers of this country have purchased and I think that given a vote—which I suppose they are every five years—the taxpayers would say, “The most important thing is that more of us are able to afford to go on these trains and to use them—and, by the way, to reduce the carbon footprint”.
Does this desirable aim—which I believe most people would think is good—conflict with the Government’s obvious desire to secure the highest sale price? Is this the basic reason for paragraph 11 of the Explanatory Notes—which I recognise are not part of the Bill—which states that the purpose of Clause 2,
- “is to ensure that all access contracts in relation to the CTRL should be outside regulation by the ORR under the 1993 Act”?
We on these Benches remain suspicious of any legislation which gives a regulatory oversight to the Secretary of State. That is not independent oversight but regulatory oversight—in this case to the vendor of the assets. We remember the recent history of the railways and wish to see nothing enacted which could lead to assets which have been largely financed by the state being placed in other hands. This could lead to a rundown in the condition of the assets—as occurred with Railtrack, with its slack standards and maintenance holidays—and a lading of the system with an immense amount of gearing in the form of debt raised against the optimistic hope of future revenue streams.
I turn now to the issue of the extension of the high-speed line to many other parts. The noble Lord, Lord Hanningfield, mentioned the platforms at Waterloo; I cast my eyes somewhere above that and think of all the people in the north of England who paid the taxes to build this line and do not have any access to it. I realise that “hypothecation” is not a word that is accepted by the Government, but they could do a great deal to satisfy many people in this country if they could find it in themselves to announce at the same time that they are at least going to plan an extension of the high-speed line to go elsewhere.
Will the Government say what attitude they would adopt towards open access operators seeking to enter the domestic market? They were obviously very dismayed, as was GNER and indeed was I, by the entry of Grand Central on to the east coast main line. But if they wish to exclude the possibility of an open access operator coming into the domestic market, would it not be more honest to put a clause in the Bill that precluded it, rather than relying on some arm-twisting of the Rail Regulator in the form of a lunchtime directive passed by the Secretary of State or some shenanigans behind the arras while nothing appears in writing, which chairmen and chief officers of nationalised industries have often been subject to?
We want to know the Government’s real intentions in presenting the Bill, and why the overriding duty of the Rail Regulator to exercise his functions should differ from those that apply to Network Rail as a whole.
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3.40 pm
The Earl of Mar and Kellie: My Lords, at two pages, the Bill looks very innocuous and—with the help of the Explanatory Notes—simple, straightforward and an aid to the sale of the Channel Tunnel Rail Link, or High Speed 1. There is the restriction on the removal of obstructions to the high-price sale, as well as several clarifications about future conditions on the lines and the role of the Office of Rail Regulation.
Ultimately, I need to ask if the Bill will lead to the best sale possible. I suspect that that does not mean the highest price but the best use of the railway in the future and the greatest advance in rail-for-air substitution. I hope the Minister will confirm that the aim of the sale is to ensure that High Speed 1—and, by implication, the Channel Tunnel—is used by a dramatic increase in all types of trains; that is, Eurostar, the Kent high-speed Hitachi Javelin commuter trains, other open access operators, freight trains and other international train operators, including Deutsche Bahn. The track access charge must be lower and the financial gearing must therefore not be too high, thereby diverting track access money to repay interest charges and thus not keeping the infrastructure in tip-top order.
I suspect that the decision to keep High Speed 1 out of the Network Rail network is correct, to enable more European trains to use it. Buried on page 2 of the Explanatory Notes is the use of High Speed 1 as the new name for the Channel Tunnel Rail Link. That implies more than one high-speed line; to have called it “the high-speed line” would not have done so. The new high-speed network must be announced soon to give hope to those who live in the north, Scotland, Wales and the west who have contributed taxes towards it, a point that has been well made before. I am pleased that National Express East Coast, among others, is now offering through fares to Lille, Paris and Brussels; for example, Edinburgh to Paris costs £89. However, passengers still have to hump their bags over to St Pancras from Kings Cross. I ask the Government to announce the commitment to develop such a high-speed network very soon.
In his remarks, the Minister reminded us that this railway was built on time and on budget. That is very good, and it contrasts rather well with the railway at the foot of my garden that proved to have rather more historic and uncharted mine workings underneath it than had been previously expected. That had a substantial effect on the budget of the Stirling-Alloa-Kincardine railway.
I was interested to hear that the rail sale is likely to be in 2009. The question is the definition of best value.
The noble Lord, Lord Hanningfield, also saw how important it is to maximise the use of the line, stressing the need for Stratford International station. He also raised an interesting query about the opportunity for services from the ordinary Network Rail network to access the Channel Tunnel. I look forward to an answer to that, because services from other parts of Kent in particular might find that convenient.
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My noble friend Lord Bradshaw asked how wide the range of purchasers might be, whether the track access charge will remain at around £2,000 per train, who would regulate it and within which jurisdiction. Answering that may be quite difficult.
We on these Benches and, I suspect, elsewhere will watch with interest whether the outcome of the legislation will be a high-speed railway that is very well used or one which it is very expensive to operate. If it proves to be the latter, it will be a grave mistake from the perspective of both the public and the environment. People need to travel and to trade. The less of the earth’s resources that are used up in doing so, so much the better. I look forward to Grand Committee.
3.46 pm
Lord Bassam of Brighton: My Lords, I predicted that this would be a slightly lonely debate and that there would not be too many of us involved in it. Despite that, I have enjoyed the contributions of noble Lords opposite, who have asked a range of interesting questions and made some valuable points as part of our continued discussion and debate about our nation’s rail network. I suppose that hidden among those questions and comments was a broad welcome for the Bill—at least that is how I interpreted them until I heard the noble Lord, Lord Bradshaw, say that he was a little suspicious. Suspicion was probably the general tenor of the comments and questions. I do not anticipate a lengthy Committee stage, but I am certain that noble Lords will seek to flesh out some of the issues to which they have referred during today’s short discussion and debate.
I shall in due course deal with as many of the questions that have been raised as I can. I certainly agree with the noble Lord, Lord Hanningfield, that we have an asset of which we can proud. He prefaced that by saying “finally”, but, in general, our railway network is an asset of which we should be proud—and we should be proud of this rail link in particular. Although it went through a slightly difficult phase after the passing of the 1996 Act, our Government when they came to power put together a very successful rescue package which has underpinned the development of High Speed 1 and enabled us to reach today’s position of being able to look forward to a well managed package of sales and ensure a successful future for, and running of, the Channel Tunnel Rail Link.
As I observed at the outset, and other noble Lords have since reflected, the Bill has only five clauses. It does not trigger the restructuring of LCR, and its provisions, I think we can all agree, are technical and limited in scope. The Bill confirms that the Secretary of State can continue to provide financial support to the rail link, and the train services that run on it. This is not a new power; it simply clarifies what was already the Government’s interpretation of existing legislation. As the noble Lord, Lord Bradshaw, said, we are tidying it up for the benefit of removing doubt.
The Bill tidies up existing provisions in relation to the regulation of the railway. It also gives the Office of Rail Regulation the ability to make a reasonable charge for any new functions that it may carry out in
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