Previous Section Back to Table of Contents Lords Hansard Home Page

If the Opposition are going to criticise what is being said, where are their report and suggestions? This fine report is well thought-out. The whole future of the country may depend on it. It is depressing if this is going to be a political battle: that will set this country back by miles. It is absolutely essential that there is a cross-party interest in this with knowledge and expertise to understand what the Minister has said. It is quite clear that they do not understand what is going on. This must be rectified. What will happen to our rail system if there is any change of Government after the general election? I am depressed by what has been said here.

Getting away from that, there is another thought about payment. It is possible to consider a railway bond on this issue. I know the Minister does not agree but that should be looked at fully before it is abandoned. In my own experience, recently I travelled on a bullet train in Japan that has been running for 20 years

11 Mar 2010 : Column 356

without a single accident. It runs every 10 minutes at 330 kilometres an hour. If and when the high-speed link is built, will it be built before the London-Beijing high-speed rail? I doubt it. The other question is whether we should still be using wheels. If it is going to be so far ahead, should not a magnetic levitation system be considered as well? I think it is too late to do that now but our high-speed rail will be of a much lower speed than most other railway systems in the world. The Government should be supported.

Baroness Farrington of Ribbleton: My Lords, I remind the noble Lord, Lord Tanlaw, that it must be brief comments or questions to allow the maximum number of people to take part in the 20 minutes.

Lord Adonis: My Lords, I pay tribute to the noble Lord, because when I was in China a few months ago looking at the high-speed line it is building between Beijing and Shanghai-which will be completed within two years and will be a remarkable construct-I visited the company in which he has a stake. It is a joint venture company with the Chinese which is building pantographs for the high-speed trains. It does excellent work and is a great example of British engineering expertise being exported. We want to see many more companies like his flourishing in export markets. We already have a good number that do, and that number will be substantially enhanced by the programmes we have in place for Crossrail and electrification.

If companies can see a supply of work coming over the next 20 years-there will be if we proceed with high-speed rail-there will be still bigger incentives to invest and our opportunities to export will be greater still. This applies not only to China, where the noble Lord has great experience; the United States is about to embark on a high-speed rail revolution. President Obama has made significant funds available for development work on a number of high-speed rail projects. In Florida and California, in particular, schemes are being developed which would bring about connectivity and capacity benefits similar to the ones I have described in respect of links between British cities. I expect to see a significant market in the US open within the next few years, and our excellent rail manufacturing, engineering and consultancy sectors are well poised to take advantage of those markets, particularly if we are ourselves committed to developing a north-south high-speed rail project.

The Earl of Mar and Kellie: My Lords, can the Secretary of State clarify, first, whether in the early stages after completion the trains from north Wales, the north of England and Scotland will run on to the new HS2 line from Birmingham to London? Will the trains from these destinations be, for example, the 140 miles-an-hour Pendolinos or will there have to be a totally new fleet of high-speed trains? Will only new trains be allowed on the high-speed line? Secondly, is there any possibility of services running from, for example, Birmingham to Brussels?

Lord Adonis: My Lords, there is certainly a possibility of services running from Birmingham to Brussels. The report sets out a number of options for how High Speed 2 and High Speed 1 can be linked, including the

11 Mar 2010 : Column 357

possibility of developing a fixed rail link which will enable the trains to run through. There is also a possibility-the two are not mutually exclusive-of a rapid transit system between Euston and St Pancras. By rapid transit, I mean that Euston and St Pancras would be only two minutes away from each other. At the moment they are very difficult to travel between, yet they are much closer than the terminals of most airports. If we could link the two then, given the frequent Eurostar trains from St Pancras, this would greatly enhance the capacity of people coming from the high-speed line to travel on to the continent, whether or not there was also a fixed link between the High Speed 2 and High Speed 1 lines.

Eurostar is also important in the context of services going off the high-speed line. The report envisages that the high-speed fleet would include trains that, like the Eurostars, were capable of running on both high-speed and conventional tracks. You would get the maximum benefits of the high-speed line while the trains were travelling on it but they could serve destinations beyond. This gets very technical. We have the big issue that in Britain we have a much narrower loading gauge than applies on the continent. That is why the Eurostar trains had to be specially designed so that they are capable of travelling on the British tracks; standard continental trains cannot travel on the British tracks because they are too wide. Special trains would need to be designed. This took place with Eurostar and we envisage it taking place for at least a portion of the trains that are to travel on the high-speed line in order that they can serve destinations beyond the line itself.

Lord Forsyth of Drumlean: My Lords, I congratulate the Secretary of State on his visionary approach. However, the experience of past large infrastructure projects is that invariably the outturn costs are more than estimated costs. He is talking about a £30 billion project; this Government are already borrowing one pound in every four spent. Can he say a bit more about how it is to be funded? Apparently, he has rejected the idea of rail bonds. He has touched on the idea of finding ways of securitising some of the income. Given the position with banking and the availability of finance, it would be helpful to hear more about how this will be funded and how the project is to be brought to fruition.

Lord Adonis: My Lords, as I said in answer to an earlier question, we believe there is room for substantial third-party funding in stations through public/private partnerships, which would deliver discrete parts of the project. There will be big income streams and huge development opportunities in respect of the stations, so we think those sources of funding will be considerable.

However, I am not ducking the fact that this high-speed line will only come to fruition if there is significant state investment. The noble Lord says that there is a history of cost overruns on projects of this kind. I see the noble Lord, Lord Lawson, sitting in front of him. As a former Chancellor, he is only too well aware of having to deal with these issues in the past. It is precisely because of the history of cost overruns that the Treasury-it may have been under the noble Lord's

11 Mar 2010 : Column 358

guidance-insists on large risk additions to the preliminary costing of projects, typically in excess of 50 per cent of the cost. The figure of £30 billion that I referred to includes a substantial risk premium.

We have set up a review into rail costs, because the work of HS2 seems to indicate that the cost of delivering rail projects in this country is twice or more the cost of delivering new rail projects on the continent. We want to get to the root of why that is the case. It may be, as the noble Lord, Lord Bradshaw, says, that it is because we have armies of consultants and advisers who boost costs. It may also be that putting risk premiums into the costings encourages people to bid up costs because they see that in the cost profile; that argument has been put to me. We need to get into these figures because it is a fact that our continental counterparts are able to build high-speed rail lines significantly more cheaply than we appear to be able to, on the experience of High Speed 1. We need to understand why that is the case long before we start constructing this project.

On the point about whether it is affordable, if this becomes the successor project to Crossrail, construction would not start until 2017 when Crossrail is due to be completed. There is, I am glad to say, a near cross-party consensus on taking Crossrail forward. I say "near" because the Conservatives have not absolutely guaranteed that it will proceed, but there is a Conservative Mayor of London who, as he puts it all the time, is joined at the hip with me in delivering Crossrail. The work is proceeding well and I believe this will be a flagship of London's public transport system when it opens in 2017. The rate of spending on Crossrail now is about the rate of spend you would need to deliver the high-speed line after 2017. So I simply put it to the noble Lord that if it is possible for us to fund a Crossrail line for London, and if this is the big national transport infrastructure project we want to take forward as a country, it is possible in principle to fund this line going north of London after 2017.

I do not believe we necessarily get everything right when we do things differently from our colleagues on the continent. If almost every major European country and most leading Asian countries have found it affordable to build high-speed lines and see huge benefits-such that when they have built their first high-speed line, they almost invariably build other lines thereafter-it may just be that we should follow suit.

Lord Berkeley: My Lords, on the environment issues that will undoubtedly occur when this line gets built, it would be helpful if those who are protesting about the noise on the route or other factors were able to visit HS1 and see the protection that has been put in there and the lack of noise. I declare an interest, having worked on the consultation on that and the Channel Tunnel. It makes an incredible difference. My noble friend has chosen an extremely good route, based on good transport corridors. It is an excellent project and I congratulate him.

Lord Adonis: I am grateful to my noble friend for his comments. He has huge experience of the rail industry, including the construction of High Speed 1. I take great comfort from his remarks. I make a

11 Mar 2010 : Column 359

broader point: there are a lot of fatalists in Britain who think that we cannot accomplish big projects of this kind. We built the Channel Tunnel Rail Link and the Channel Tunnel. The Channel Tunnel Rail Link went through Kent, which is one of the most difficult areas in the country in which to construct a railway line. Just over two years ago we opened St Pancras station, which is one of the rail icons of the modern world. If we can do that, we should certainly be up to building a high-speed line north of London, connecting our great cities and through to Scotland.

Lord Smith of Finsbury: My Lords, as chairman of the Environment Agency, I say to the Secretary of State that this Statement is ambitious, far-sighted and enormously welcome. There will of course be a lot of difficult issues to be tackled and decided during the next few years, not least of which will be some of the local environmental impacts of the route of the line, the need for an enhanced pool of engineering skills and the source of the state funding that will be required. However, the overall economic, social and environmental benefits that will come from the development of a serious high-speed rail network in this country will make it well worth it. May I, however, gently suggest to the Secretary of State that now perhaps is a golden opportunity to reconsider his predecessor's decision on the third runway at Heathrow?

Lord Adonis: My Lords, I have huge admiration for my noble friend and any advice that he gives I take immensely seriously, but I fear that I cannot promise any immediate change of government policy on that front.

My noble friend speaks from a position of great experience in dealing with environmental projects and I welcome his response to the Statement. It is possible to reconcile our environmental objectives with the provision of this new infrastructure, but I accept that it will require a process of prolonged consultation and engagement, including on how we can best mitigate the impact that the construction of a high-speed line will inevitably have.

Set out in the Command Paper are the comparative figures for different modes of transport in terms of carbon emissions per kilometre. They are very striking. A car with average occupancy has average emissions per passenger kilometre of 128 grams of CO2. For a Eurostar train, the range is between 8.1 grams and 17.6 grams. For domestic flights, the average is 171 grams. The carbon advantage that we gain by carrying large numbers of passengers between our cities by high-speed rail is therefore very great, which is a good part of the environmental case for a high-speed rail line.

Lord Maclennan of Rogart: My Lords, I, too, disassociate myself from the curmudgeonly Conservative attitude to the Government's far-seeing Statement, but ask the Minister whether he is prepared at this stage not to rule out the possibility of further extension northwards of the high-speed line, in view of the fact that more than half of Scotland's landmass lies outside the central belt. The most rapidly growing city in the British Isles is Inverness, and access to North Sea oil

11 Mar 2010 : Column 360

and other important renewable energy alternatives lies in that part of the British Isles. Would he at least not rule that out and give it consideration?

Lord Adonis: My Lords, I am glad to be able to tell the noble Lord, for whose kind personal remarks I am very grateful, that, far from ruling it out, we are going to consult on the strategy for developing high-speed rail beyond the immediate proposals set out in the paper. I believe that, over time, if we develop the 335-mile network that I described in my Statement, there will be very great pressure to extend it. That has been the experience of other European and Asian countries once they have started the process of building high-speed rail networks. I fully accept the noble Lord's points about the great economic importance of many Scottish cities and the great benefits that they could gain from high-speed rail.

Lord Falconer of Thoroton: My Lords, I declare an interest as the chairman of the Thames Gateway London Partnership, comprising the 11 East End boroughs of London and the higher education authorities there. I congratulate my noble friend on his Statement; I entirely support his proposition in favour of high-speed rail. It will never happen without leadership, which my noble friend Lord Adonis and the Department for Transport are showing. I have one issue to raise with him. There is a station ready for high-speed trains north of Euston and King's Cross at Stratford. It is right beside Canary Wharf; it is right in the middle of the area where London will develop in the coming years. Has consideration been given to High Speed 2 stopping at Stratford?

Lord Adonis: My Lords, I am very grateful for my noble and learned friend's remarks. Perhaps it is just about in order for me to say to the House that my noble and learned friend's son is one of my officials in the Department for Transport, so the praise that he is showering on my officials is praise that should be widely distributed within his own family as well. His son does a great job in the department.

On the serving of Stratford by high-speed trains, the Javelin trains, which are providing an excellent new high-speed service to destinations in the Medway towns and east Kent, stop at Stratford and are hugely boosting the regeneration taking place there. There is an ongoing debate about Eurostar serving Stratford, but were there to be through high-speed trains from the High Speed 2 line to the High Speed 1 line, there would be a strong case for some of them stopping at Stratford.

Lord Howie of Troon: My Lords-

Lord Faulkner of Worcester: My Lords, I am afraid that time is up.

Lord Howie of Troon: What a pity.

Barnett Formula

Motion to Take Note

12.37 pm

Moved By Lord Richard



11 Mar 2010 : Column 361

Lord Richard: My Lords, the exodus having taken place, perhaps I could say one or two words about the Barnett committee. I had the privilege of chairing your Lordships' ad hoc Committee on the Barnett Formula. It was an interesting committee, whose membership is worth looking at. Not only was the membership good but it produced a unanimous report. We were helped in coming to our conclusion by our special advisers, Mr Alan Trench and Mr Peter Kenway, who gave us invaluable advice. We were extremely well served also by one of your Lordships' Clerks, Ms Audrey Nelson. It is almost de rigueur now to mention Clerks, but she did an extraordinarily good job and I am very grateful to her.

The mandate given to the committee was necessarily limited. It was,

I am delighted that my noble friend Lord Davies of Oldham will reply for the Government to this debate. He has always struck me as the sort of Minister who is essential in any Government. You give him a brief on anything and he gets up, he is persuasive, he is bland, he is pleasant and he is very good at defusing a situation and bringing the temperature down. I pay tribute to him for all those qualities, which I have observed on many occasions in the past, but I am bound to tell him that, in all the briefs that he may have handled from that Dispatch Box, to defend the position of the Government on the Barnett formula is going to prove a very difficult, forensic task indeed. At the outset, he has my deepest sympathy.

Our terms of reference were not only limited but they specifically excluded consideration of three particular areas. One was the overall system of funding the devolved Administrations, particularly tax-raising powers. Secondly, we were not allowed to consider other political aspects of the devolution settlements. Thirdly, we were not allowed to consider the distribution of funds within the different regions of the United Kingdom. Therefore, the scope of the inquiry that the Select Committee undertook was focused tightly on the methodology and the practical application of the Barnett formula.

We asked ourselves four main questions and produced unanimous answers to them all. First, what is the Barnett formula; what is its purpose; how did it come to be introduced; how has it worn with time? Secondly, how does the formula at present operate, particularly the part that the Treasury plays? Thirdly, is the formula still relevant and, if not, what should be done? Fourthly, is it possible to produce a formula for the distribution of moneys from central government to the devolved Administrations that is based on an assessment of need rather than, as at present, only on population?

I cannot resist going into the history of the Barnett formula a little, although I see that my noble friend Lord Barnett is here. The history is interesting and, indeed, instructive. It dates back to 1976, when it was felt by Ministers in the Treasury that a formula was needed to determine the territorial distribution of public spending in the UK. As far back as 1888 the

11 Mar 2010 : Column 362

Goschen formula-named after the then Chancellor of the Exchequer, the one whom Lord Randolph Churchill forgot-allocated funds based on the population: 80 per cent to England and Wales, 11 per cent to Scotland and 9 per cent to Ireland. Over time the precision of that formula came to be eroded. After World War II successive Scottish Secretaries of State negotiated additional allocations. They argued special needs, such as sparsity of population in the remote areas and density and poor housing in the central belt.

The introduction of what became known as the Barnett formula was part of a wider attempt to constrain public spending in the mid-1970s. The new formula was in essence an update of Goschen, being based on population rather than need. I cannot resist quoting from one or two portions of the evidence given by the noble Lord, Lord Barnett. He made it clear to us that the formula was not designed as a permanent solution. He said:

"I thought it might last a year or two before a Government would decide to change it. It never occurred to me for one moment that it would last this long".

Later, I put it to him:

"You devised a mechanism which helped the Treasury to distribute money. You did not base it on need. It was a straight population index and you did not think it would last".

To this, the noble Lord, Lord Barnett, gave a simple and definite answer: "No". When asked whether he thought that the formula had been successful, he answered in thoughtful terms:

"Successive Governments over 30 years have kept it going. I do not consider it is successful. I do not think it is fair. It cannot be fair with this kind of gap ... At the moment, all one can say is that the figures indicate a huge gap in the expenditure of the different regions".

Right at the outset of this debate, the author of the formula is disclaiming any responsibility for its longevity.

One of the oddities of this part of our inquiry was that it emerged that, at the very time that the Barnett formula was being proposed by the noble Lord, Lord Barnett, the Treasury was engaged in a detailed assessment of need. The noble Lord, Lord Barnett, was asked whether he knew this. He replied:

"If they were, it was not done by me personally. I was not doing any needs assessment".

Summing up his evidence, I put it to him in this way:

"As I understand it, what you have been telling us can probably be summed up in two sentences. You devised a mechanism which you hoped would last for a few years. You did not expect it to last for as long as it has lasted. You are not sure now whether it is based on the right criteria and you lean towards having, among other things, a needs-based assessment. Is that fair?".

He answered: "That is fair".


Next Section Back to Table of Contents Lords Hansard Home Page