Lord Berkeley: My Lords, this is a very interesting amendment. I go even further than the noble Lord, Lord Hanningfield, in suggesting that the whole question of historical support should be resolved at a very early date. My noble friend said in Committee that all passenger operators—rather than freight
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operators—should be treated equally in terms of access rights and access charges on the CTRL. There is absolutely no reason why the Government should not sell Eurostar UK without any conditions, subsidies or anything else to the highest bidder on the basis of the charges.

On the previous amendment, my noble friend said that the charges for passenger trains, and I assume it is all passenger trains, would be £2,000 per train as a contribution to the financing costs of the CTRL, plus the operating costs. Several issues come out of that. First, if the Government start subsidising international services, it is inevitably a can of worms because you do not know what is happening on the other side of the Channel. SNCF or Deutsche Bahn might want to come in as competition, as we have discussed. You do not know what subsidy they are getting for which services, so it is a seriously slippery slope to start to subsidise any international services, including Eurostar. It should not be subsidised in the way that might be inferred from the last two lines of the amendment. I will leave that to the noble Lord, Lord Hanningfield.

However, there is an even bigger problem here, because the charges that appear to have been considered for using the CTRL are based on what they think they can get away with with Eurostar, which includes a £20 charge per passenger for using the Channel Tunnel, regardless of how many people go. I have been talking to some people who have an interest in local authorities in Kent, and they are still very upset that only one or two Eurostar trains a day are stopping at Ashford. We talked about the fact that it is a high-speed line and any train should be able to go on it, so a service such as Manchester-Birmingham-London-Stratford-Ebbsfleet- Ashford-Calais-Lille, for example, could be run by a competing train operator. The answer was, “Who is going to fork out £2,000 a train for going up 60 miles of track?”. That is a very high figure for a service to start. There will be the same problems as there are with the Channel Tunnel. I said on the previous amendment that the charges will be so high that no one will use it. The figure of £2,000 is arbitrary. I do not know whether any discussions have taken place with German or French railways or anyone else. Eurostar has little choice but to accept it, because it is owned by LCR, which is guaranteed by government; so it is hardly a discussion between equals.

There is one last problem that I would like to ask my noble friend about. On the rest of the network, train operators pay so much to use a station. If a train stops at a station, they pay so much to Network Rail for the services that may be provided, such as the platform being in good order. The international stations used by Eurostar are quite expensive and they are quite expensive to operate, because you have all the special facilities such as customs and immigration and the segregation that goes with that. Is the idea that there will be a separate charge made to Eurostar and anyone else who wishes to operate international services for calling at stations? At the moment, Eurostar probably either owns or operates the stations, but how will this work with open access? This is all a barrier to other operators coming in and providing competing services. This is the only opportunity that we have to talk about these things before it is all signed and sealed
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in the contract, and we suddenly find that we end up with another contractual disaster, which we have talked about already with the Channel Tunnel and other things. I would be grateful to my noble friend for some responses. There is merit in such an amendment, and maybe the noble Lord, Lord Hanningfield, will consider bringing it back on Third Reading.

Lord Bassam of Brighton: My Lords, I am grateful to the noble Lord, Lord Hanningfield, for reminding me about my old school. It was not called Colbayns in those days; it was Clacton Secondary Modern School for Boys, and it became a comprehensive some time shortly after. I visited the school some years ago, and I was most impressed by the headmaster—I think it is Mr Pavitt—who has done a brilliant job of turning the school around. Since my words at the Dispatch Box are recorded, I offer to pay another visit, and perhaps Mr Pavitt will invite me again. I greatly enjoyed it the last time I went.

I thank the noble Lord for tabling this amendment and allowing me another opportunity to outline the Government’s position. Under the present legislation, the Secretary of State can support services in the United Kingdom. In the context of international passenger services, that has translated into supporting Eurostar UK Ltd, the part of the Eurostar joint venture that is responsible for paying the UK-side access charges. The Secretary of State has not stood behind the French and Belgian parts of the joint venture in that way; they rely on the French and Belgian state railways for any support they receive.

Lord Berkeley: My Lords, when my noble friend says “support” I think that he means the support for paying the fixed charges relating to the Channel Tunnel. Is that correct, or is he talking about the Channel Tunnel Rail Link?

Lord Bassam of Brighton: My Lords, the support that we have provided has been to Eurostar UK Ltd. That is the nature of our support. It is for the French and Belgian parts of the joint venture to provide support to their element of the part of the railway that they run.

The amendment would restrict the Government’s ability to provide any support for international services, other than that historically provided to Eurostar. As I have said before, the Government’s intention is substantially to reduce the public support for international services, mainly by putting in place a commercially sustainable, long-term access charging regime. In Committee, noble Lords were concerned that the Government’s position had changed since Second Reading. I assure them that this is not the case; our position on providing funding to Eurostar has remained unaltered since the Bill was introduced in another place.

At Second Reading, I said that Clause 1 gives the Secretary of State commercial,

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My point was that the provision of some continuing support to Eurostar and other international service operators may be desirable, not that Eurostar’s position is or will be akin to that of a domestic franchisee.

For clarity, Eurostar does not provide its services under a franchise agreement with the Secretary of State, and there is no intention that it should do so in the future. While it currently has the benefit of reserved capacity on HS1 until 2052 on a take-or-pay basis, it is proposed that this will be renegotiated as part of the restructuring, so that its position as regards access to HS1 will be the same as any other open access operator. The historical funding structures that are in place include the access charge loan, guarantees of Eurostar’s rolling stock lease payments, hedging obligations and its ability to pay HS1 access charges. Removal of this support now would damage Eurostar’s ability to compete as a sustainable, stand-alone entity. To damage that could be commercial suicide.

We also wish to retain the power to reorganise or amend these existing support packages to achieve best value for taxpayers through the restructuring. The amendment would prevent us achieving that, which is why it cannot be supported. I add for certainty that the Government do not intend to put Eurostar in such a position that it has an unfair advantage over prospective competitors; in any event, state aid rules prevent them doing so. 

Finally, although we have no intention of doing so now, we do not believe that a future Secretary of State should be left without the power to provide any new support for international services in future, should they choose to do so. No decisions have been made on the future of Eurostar, and Clause 1 seeks to provide the Government with as much flexibility as possible in their pursuit of the most economically advantageous return for taxpayers. For those reasons, I urge the noble Lord, Lord Hanningfield, to withdraw his amendment.

Lord Berkeley: My Lords—

Lord Bassam of Brighton: My Lords, two or three questions were asked, and if the noble Lord, Lord Berkeley, will let me I will reply to those; I suspect that his interruption might have been on them. He asked about the prices charged for stations. There is to be no charge, to incentivise operators to stop at stations. He suggested that access charges could become unaffordable. The Government intend to cap access charges at a level affordable to new entrants into the market. The analysis behind the level of access charge is based on the principle of affordability. The noble Lord also raised an issue about the Channel Tunnel and charges. We are setting charges now, with the benefit of more understanding of the market for international services than was available 20 years ago when Eurotunnel first raised debt. Eurotunnel now has the benefit of a 50 year-plus contract, giving guaranteed usage levels and charges for freight and passenger services. There is no equivalent long-term contract benefiting High Speed 1. I hope that I have covered his points.

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Lord Berkeley: My Lords, I am grateful to my noble friend for clarifying those issues. It might help if he were prepared to write to those who have taken part in the debate, to separate the possible government support that Eurostar gets from using the Channel Tunnel, because of the fixed costs that he mentioned—they are different on the French side—from the costs associated with using the Channel Tunnel Rail Link. I was getting a bit confused, so I am sure that it would be better if he wrote to us.

Lord Bassam of Brighton: My Lords, the noble Lord is right to say that these things are complex. I will set out them out in correspondence for the benefit of all noble Lords who have taken part in the discussion. I think that I have answered the main point; obviously we wait to hear what the noble Lord, Lord Hanningfield, has to say.

Lord Hanningfield: My Lords, I thank the Minister for his answer. The exchange between him and the noble Lord, Lord Berkeley, hit the nail on the head. I have never said that I wanted to stop the historical funding. One recognises that there has to be historical funding during the restructuring, et cetera; I want to be absolutely clear on that. I may have tabled an amendment that would stop it, but that is why I ended my comments by asking the Government to help on the amendment, because I still feel that there is no real clarity about what will happen in future. That is what all this discussion is about. All our discussions slightly go round in circles. It is a bit like the first amendment in a way. We are basically behind the Bill, but the two discussions that we have had today are mainly through lack of clarity and understanding where the Government will go after the historical funding and restructuring.

We are giving the Government an opportunity to think and to clarify these things a bit more for us before Third Reading. I hope that the noble Lord, Lord Bassam, can take up the suggestion of the noble Lord, Lord Berkeley, and write to us to try to clarify the issues. I repeat that I do not want to stop historical funding; I just want to know where we are going afterwards. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Regulatory Enforcement and Sanctions Bill [HL]

7.44 pm

Lord Bach: My Lords, I beg to move that the Bill be now further considered on Report.

Moved accordingly, and, on Question, Motion agreed to.

Clause 38 [Fixed monetary penalties]:

The Parliamentary Under-Secretary of State, Department for Business, Enterprise and Regulatory Reform (Baroness Vadera) moved Amendment No. 53:

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The noble Baroness said: My Lords, Amendment No. 53 would remove a regulator’s ability to calculate fixed monetary penalties by reference to “prescribed” criteria, and is similar to Amendment No. 112 moved by the noble Lord, Lord De Mauley, in Grand Committee. The reference to prescribed criteria caused some confusion when the issue was debated in Committee, and on reflection we accept that the provision could overcomplicate the sanction and are happy to remove it.

The amendment would mean that fixed monetary penalties would simply be of a prescribed amount or amounts, set out in the order made under Part 3. That process will be transparent, as the level of penalty will be specified in both the order and the penalty guidance that the regulator will be required to publish under Clause 62. That will still allow fixed monetary penalties to be set at different levels if appropriate. For example, a sole trader may be given a £50 penalty, whereas a company might receive a £100 penalty, or the penalty for carrying out an activity without a licence may be £50 for one week or £100 for two weeks. I beg to move.

Lord Lyell of Markyate: My Lords, I am grateful to the Minister for her brief explanation of government Amendment No. 53, with which are linked seven other government amendments. I am still fairly new to this House, as is she. I had expected that, rather than come back to them, the procedure would be that she would speak to all the government amendments. Perhaps there could be a little clarification from the noble Lord, Lord Bach.

Lord Bach: My Lords, I shall do my best to explain. The noble Baroness has done what is quite normal on a grouping of this kind, with a government amendment at the start but an opposition amendment from another noble Lord as part of the group. The Minister will move the first amendment and then the other noble Lord can move his amendment. The Minister will then come back to debate the noble Lord’s amendment and speak to her other government amendments at that time. I hope that that is satisfactory.

Baroness Butler-Sloss: My Lords—

Lord Lyell of Markyate: My Lords, I am most grateful for the clarification; I can certainly live with that.

My amendment deals with the question of the maximum penalty. What is suggested is the maximum available in the magistrates’ court. The noble Baroness will clarify it for me; I apologise, as I forget at the moment, but I think that the maximum in the magistrates’ court is £5,000, but it could be £3,500. Oh! It seems that £5,000 is correct; I am most grateful. I suggest that the figure should be half the maximum. The amendment gives me an opportunity to raise the important question of how many different levels of fixed penalty the Government have in mind. When I asked this earlier on Report and in Grand Committee, the Government said that they had not thought it through yet but that there might be two—one for a rich business
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and one for an individual. I said, “Supposing it’s a rich individual and a small business”, and the Government said that they had not thought that through, which they plainly have not.

The noble Baroness has given us two extremely modest penalties, which in one way is encouraging. However, if the Government have in mind penalties of £50 or £100—£50 a week can be a darn sight more frightening if you have been trading without a licence without realising it for six months—that needs some explanation. Why do they need £5,000 as a maximum for fixed penalties? We are pretty used to quite small fixed penalties in this country; we have learnt to live with them in straightforward cases such as parking. The Government keep saying, “This is not tick-box”. So the Government have abolished criteria because they could not think what the criteria ought to be. They were asked about them and it was plain that they had not thought of any sensible criteria. I could have thought of some criteria, but, anyway, they decided to throw up their hands and surrender on that one. Now they are congratulating themselves on removing it; but that leaves the practical question just as much in evidence, because the Government have proposed a range of £5,000 and we do not have a clue as to how they think the statutory instruments, when they eventually come through, will be worded and what they will provide.

However, I am probably being totally unjust and I look forward to hearing what the noble Baroness says to elucidate this point. I shall sit down now, because I believe that I shall be able to speak to, or at least comment on, some government amendments later.

Baroness Vadera: My Lords, I would never accuse the noble and learned Lord of being unjust, but perhaps I may clarify the matter. We understand the concerns that have been raised, and we have, of course, already taken steps to limit fixed monetary penalties. In Committee, we moved an amendment to cap the level of fixed monetary penalties, so that they cannot exceed the maximum fine available in the magistrates’ courts, as the noble and learned Lord said. We have also proposed simplifying the process for fixed monetary penalties, which will now simply be set at a prescribed amount or amounts.

The effect of Amendment No. 54 would be to cap fixed monetary penalties in most instances at a maximum of £2,500, as there are some exceptions to the £5,000 limit in magistrates’ courts. Setting a cap at this level would be an entirely arbitrary limit on the penalty, and I am not sure why the noble and learned Lord has proposed a cap at half the magistrates’ courts maximum, not a quarter or three-quarters. Also, this would unnecessarily limit the flexibility and effectiveness of the new powers.

Lord Lyell of Markyate: My Lords, I set the limit at an arbitrary figure in order to probe what was in the Government’s mind. I await that keenly.

Baroness Vadera: My Lords, the limit that would be set by Amendment No. 54 appears to be regardless of sector. For example, some offences within the
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scope of Part 3 relate to failure to hold a permit. In the environmental field, this fee could be as high as £3,000. Some offences of this kind might in future be dealt with by means of a civil sanction. However, the noble and learned Lord’s amendment would preclude the use of a fixed monetary penalty altogether, as the Minister would be unable to prescribe a fixed monetary penalty at a level that reflected the benefit that a business might accrue in not obtaining a permit.

We have also tried to design the measures in Part 3 so that there are no perverse incentives for regulators to pursue a particular course of action. Restricting the level of fixed monetary penalties could upset that balance. It could, for example, encourage the regulator to pursue criminal prosecutions instead of imposing a civil sanction, given that the fine in the courts could be double the level of the fixed monetary penalty.

I understand the concerns of the noble and learned Lord regarding proportionality. I should stress that the Bill simply sets a maximum level for fixed monetary penalties. It will be the order made under Part 3 that sets the actual levels of fixed monetary penalties for a particular offence and clearly this will not be set at the maximum level in every case. At this point, we should not arbitrarily restrict the ability of Ministers to set fixed monetary penalties at an appropriate level so as to provide an effective deterrent.

The noble and learned Lord asked about the various levels at which fixed monetary penalties could be set. As the noble and learned Lord knows, the Bill is enabling legislation and applies to a wide range of regulators and regulatory offences in a wide range of circumstances for a wide range of sectors. As I mentioned earlier, in the environmental field, the fixed monetary penalty may have to be as high as £3,000 to reflect the benefit gained by not obtaining a permit. We would expect most fixed monetary penalties to be much lower. It should be noted that the Minister must set out in the order the penalty amount for each offence and must consult before making that order. It will, of course, be subject to the affirmative resolution procedure and, no doubt, the noble and learned Lord will have views to express at that time. Parliament will, therefore, have the ultimate say on whether the penalties for a particular regime are set at the right level. It is not accurate to suggest that they will be set arbitrarily at varying and different types of levels. The fixed monetary penalties will have to be appropriate and will be debated and set in order, with the relevant sectors and businesses in mind.