Secondly, I am pleased to read in the White Paper that, for the first time, the position of pension funds in the ring-fencing will be important. The issue is to do with making sure that the regulatory framework for pension funding is not breached when dealing with the banking separation.

Lord Sassoon: In answer to the noble Baroness’s first point, we are confident, and we are absolutely on top of and watching her second point, which is important.

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Baroness Wheatcroft: My Lords, I welcome the White Paper and the accompanying Statement. Separating risky banking from core retail banking is essential but we have to be careful that the ring-fence does not become a Chinese wall. It will take some policing. We also need to be very careful in watching to what extent the hedging that will be allowed within the ring-fence is monitored by the various authorities. I have some qualms about that.

I am also concerned about the timetable. I am delighted to hear that the 2019 deadline will stay but I am puzzled as to why that needs to be the case for more than the capital requirements. I would have thought that the ring-fence might have been installed sooner than 2019, which sounds a long time away. My final point is about why on earth households would put their money into a ring-fenced bank. I cannot see why their money should be guaranteed if they put it in a riskier institution. Perhaps the Minister will answer that.

Lord Sassoon: I would very much like to respond to those points but I see that the clock has reached 20 minutes. I do not like to do this but I had better write to my noble friend Lady Wheatcroft on these important points.

European Rail Market: EUC Report

Tunnel Vision? Completing the European Rail Market

Motion to Take Note

5.06 pm

Moved By Baroness O'Cathain

That this House takes note of the Report of the European Union Committee on Tunnel Vision? Completing the European rail market (24th Report, Session 2010–12, HL Paper 229).

Baroness O'Cathain: My Lords, this report is the result of the work of the sub-committee on the internal market, infrastructure and employment, which I chair; work that was carried out engagingly, energetically and, dare I say, enthusiastically by all members of the committee. I pay tribute to them and thank them for their sterling work. The work programme and the final report could not have been completed in such a professional way without our clerks, John Turner and, from October 2011, his successor Mark Davies, together with our policy analyst, Michael Torrance. I thank them most sincerely on behalf of the whole committee.

The members of the committee recognise that the most important challenge facing this country, and indeed facing other European member states, is ensuring strong and sustainable growth. Ensuring a strong internal market with a well developed transport network to connect trading partners is critical to that growth. The European Commission’s 2011 report, Roadmap to a Single European Transport Area, identified rail as being central to that objective. This guided our choice of topic. Our committee also determined that as part of our inquiry we should have a consumer focus noting that, sadly, the consumer is left out of a great deal of the discussions on the European Union.

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The Channel Tunnel opened in 1994 as a means to give fresh impetus to relations with France and mainland Europe but also as an important step in expanding the internal market, easing the movement of both people and goods. As an aside, let us never forget that the internal market is an enduring tribute to the Government of my noble friend Lady Thatcher following the publication of the White Paper on completion of the single market in June 1985. The committee felt that an examination of the challenges facing the operation of the Channel Tunnel and the obstacles to the fulfilment of its potential should act as the lens through which we focused our assessment.

Our first findings rocked us somewhat. Capacity utilisation for freight was around 10% and that for passenger services was around 50%. Not making too fine a point of it, this seems an abject failure to utilise an undoubted asset. Our overall conclusion was that there were many obstacles which should be addressed. Those with a suspicious mind could wonder whether some of the obstacles were based on the status quo position—the idea that “if it ain’t broke, don’t fix it”. Well, don’t fix it, it does work—but neither as efficiently nor as effectively as we think that it could. The continued fragmentation of the European rail market is a true barrier to trade. The remaining technical, administrative and legal obstacles must be addressed, and rapidly, as such action would surely encourage economic growth. The Government’s response agrees but there does not seem to be a huge sense of urgency.

I should like to explain briefly the nature of six of the obstacles. First, there is a need to establish strong and independent regulators. That does not mean more powers to Brussels. It simply calls for better use of existing powers. We did not recommend the creation of an EU-level economic regulator and the government response supports our view.

Secondly, we suggest that the actual governance of the Channel Tunnel should be reviewed. A figure on page 19 of the report shows the complicated structure. One of our witnesses, Professor Vickerman, was clear that the structure was,

“no longer fit for purpose”.

More than 25 years after the treaty of Canterbury, which established the model, now is an opportune time to examine it. The Government, though, are not convinced. They stated in their response that they see,

“no imperative to review the Treaty. Nor do we believe there is any appetite for renegotiation of the Treaty on the part of the French authorities”.

My third point is that there are almost certainly obstacles in the commercial operations of the tunnel. Obviously, the more operators running services through the tunnel, the greater the competition and the wider the choice both for freight operators and consumers. Although there is now more than one freight operator, Eurostar remains the sole provider of passenger-only services. Deutsche Bahn has applied to operate services, but I hear that there are further delays to the application process. That cannot be acceptable. We recommend that authorisation should be granted without undue delay. Many obstacles seem to have been put in the way, as detailed in the report, although I have to admit that I remain to be convinced of their validity based

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on the evidence that we received. I just hope that it is not one of those very old non-tariff barriers to trade that bedevilled my early career in both the motor and food industries.

The fourth obstacle we identified were the charges for use of the tunnel set by Eurotunnel, the company that won the concession to build and operate it. We appreciate that they comprise a significant part of Eurotunnel’s income, particularly as it is a private company that has to cover construction and running costs, but we concluded that a reduction in the medium term could serve as a powerful fillip for the development of passenger services, and a concomitant for growth. New entrants could be deterred from seeking authorisation to provide services if the access charges are not fair, predictable and more easily available.

For my fifth obstacle, we come to one of those words that does not exist in the very large dictionary that we have in the office upstairs—interoperability. Actually, it means what is says, I am told, and I suppose we will get used to it. The EU-wide technical standards for interoperability, known as TSIs, set out comprehensive safety standards, including for long tunnels. The Channel Tunnel, though, has distinct and unique standards. We were not convinced that the Channel Tunnel is a unique case. Two committee members, the noble Lord, Lord Bradshaw, who is sadly not in his place today and is unable to attend this debate, and the noble Lord, Lord Berkeley—together they are the most knowledgeable train experts in Parliament—paid their own expenses to go to Switzerland to investigate the justification. They were not persuaded and, when we heard their comments, neither were we. The Government's response was to state that:

“Detailed work is underway to address the remaining issues. Where this work demonstrates that specific requirements are no longer necessary, we anticipate that those requirements will be rescinded”.

When does my noble friend the Minister anticipate that the work will be completed and how long afterwards will the requirements be rescinded? This exercise is delaying the ability of other operators to provide additional services, thereby inhibiting competition; competition which would almost certainly benefit the consumer. Of course, safety is paramount, but it should not be used as a smokescreen.

The sixth of the identified obstacles that I choose to deal with in this debate relates to security. It is an obstacle to expansion. Of course, we are much more security conscious today than we were when the Channel Tunnel first opened for business and, sadly, concerns in this area are unlikely to decrease. All areas of our lives are affected but there is a widespread feeling that the measures and methods employed in this area seem to be somewhat inefficient. The tunnel uses what are called “juxtaposed border controls”—yet another strange phrase—involving the checking by both UK and French officials before authorisation for departure. With the hoped for extension and expansion of services, this process could be unsustainable. The Government must look again at their approach here and their commitment to reviewing these arrangements is very welcome.

I return to the need for customer focus. Consumer interests must be brought to the fore. Chapter 6 of the

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report details all the current “irritant factors”, including through-ticketing problems and opaque information on passenger rights. These, coupled with some language difficulties, can make the wished for wonderful experience of travelling to and from the mainland of Europe a potential nightmare. We are unanimous that the customer should feel valued and hope that our report will make a move in that direction a reality.

Having touched the surface of the scale of the challenge ahead, I hope I have convinced noble Lords that something should be done. The Channel Tunnel could, should, and indeed must be an important part of a thriving European rail network—one that is popular, efficient, easy to use and promotes growth. There is much to do and we need a real sense of urgency to do it, especially when the possibilities for the Channel Tunnel fall into the win-win category.

I thank in advance all who are taking part in this debate and I am looking forward very much to their contributions. In particular, I look forward to the response of my noble friend Lord Attlee, hoping that he gives the report strong support and shows a commitment to adopting an urgent approach to the recommendations.

5.17 pm

Lord Faulkner of Worcester: My Lords, I congratulate the noble Baroness, Lady O’Cathain, on the excellent way in which she introduced this debate. I do not think that she said a word with which I disagreed. I also congratulate her and the other members of the sub-committee on producing a very impressive report.

As many of your Lordships know, I am a passionate supporter of the railways and I am keen always to see their role in the provision of national and international transport expand. It is clear that the sub-committee shares that view. Fifty years ago, the railways of Europe looked very different from how they look today, but common specifications set out by the International Union of Railways meant that rolling stock could cross the continent regardless of national boundaries, albeit with a change of locomotive at frontiers.

Some of us are old enough to remember the blue sleeping cars drawn up at Calais Maritime behind a steam locomotive ready to take British passengers from Calais to the south of France or to Venice. You could take a direct train from Paris to Istanbul or from Ostend to Moscow. Trains of fruit from Spain, motor scooters from Italy or manufactured goods from Germany and France crossed on train ferries, as did the night ferry sleeping car train each night from Paris and Brussels to Victoria. Then, in the 1970s, with the development of high-speed routes, new multiple-unit trains and the move to containers, this universal compatibility broke down. The market failed to deliver a common solution, national railways focused on internally set objectives and the European Commission was slow to react to those changes.

From being the odd one out in Europe in the 1960s, Britain is now at the heart of railway technical and operational development. Eurostar shows how trains can cross frontiers seamlessly, not just between Britain and France but on into Belgium as well, and soon further into Germany and the Netherlands. Far from

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changing the locomotive at the frontier, the train crews themselves work right through to Paris and Brussels. In this case, the different technical standards in each country have been overcome with the remarkable trains that can, at the turn of a selector in the driver’s cab, handle four different types of traction current and signalling systems.

Today’s debate is important because, as the noble Baroness said, there is scope to attract more people to use international rail services and because much more needs to be done to encourage rail freight through the tunnel. The sub-committee’s report makes an important contribution to moving this argument forward.

Cross-channel services are always going to be more complex to operate than domestic services because of the involvement of Eurotunnel, which has its own shuttle services to consider, and the fact that the only link to the rest of Europe requires the active co-operation of SNCF between Coquelles and the Belgian border.

On the freight side, international traffic via the Channel Tunnel seems not to be a priority for SNCF. In the past, this has been reflected in poor reliability and problems in arranging additional trains at short notice. Whatever technical or legal solutions are proposed, clearly a lot of work needs to be done to encourage a different approach by SNCF.

On freight, it is always going to be difficult to build rail market share when the cost of taking a container through the tunnel can be lower using a lorry on Eurotunnel’s shuttle compared with a freight train, and this reflects the usage charge. There needs to be a move towards charging avoidable costs for freight—as is the case on Network Rail at home—if market share is to have a chance to grow.

There is little in the way of fair competition between road and rail freight. European hauliers do not pay towards UK infrastructure costs, for example, nor do they pay fuel duty if they fill up before crossing to Folkestone. The choices are difficult: there needs to be either some form of subsidy or cross-subsidy for rail freight operators to use Eurotunnel’s infrastructure or a charge for other European hauliers to use the infrastructure that Britain currently provides at no cost to them.

The sub-committee is right to draw attention to the inherent contradictions surrounding Eurotunnel’s operation. This is Britain’s only fixed link to mainland Europe. It is a privately owned concession where the concessionaire also runs a shuttle service for freight and passengers, and, at the same time, it is the infrastructure authority for through trains, which themselves have to fit both Eurotunnel’s train paths and the available paths on Network Rail and its French equivalent.

Up to now, this process has been left to the market. The sub-committee’s report shows that this is not working and, as demand increases, action will be needed to optimise the use of the one pair of tracks that link the British and French rail networks. Our own British experience on the east coast main line is that the only way to optimise capacity on a constrained railway with multiple operators is by strong focused planning of the way in which that capacity is used. In the case of the east coast main line, this has been done

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by the Department for Transport as the specifier of franchised services on the route, but the needs of freight and two open-access passenger operators have been protected as well.

The question therefore is: can Eurotunnel perform that role or does this need action by the IGC or a specially convened group of train planners from Network Rail, Eurotunnel and the French infrastructure owners? I am advised by Eurostar that Eurotunnel declines to take part in any of the intra-European path allocation discussions and it has not been keen on changing passenger train paths, even when that would reduce journey times or allow more trains to use the tunnel at peak times.

Eurostar also makes the point that the current structure of access charges needs to be reviewed. The per-passenger toll is preventing new markets from being developed which would otherwise be able to cover the direct operational costs. There needs to be a lot more openness and transparency in the allocation and recovery of costs and there needs to be a proper policy for discounts.

As an example, if we compare a London to Paris journey, the total infrastructure charges—that is, terminal costs, handling fees and landing charges—for a flight are around £2,400; for a Eurostar train to Paris they are £21,500, of which the tunnel accounts for £12,500. Even taking account of the fact that a Eurostar train tends to carry two and a half times as many people as a plane, that is still a huge difference.

The sub-committee is right to draw attention to the spare capacity that exists in the Channel Tunnel, to which the noble Baroness referred, but it is not hard to see why that exists. It is my belief—I think that the Government share this view—that the future lies with longer-distance high-speed rail travel. I hope that the Minister will say that when he replies. The desirability of building a new high-speed railway obviously has not been part of the sub-committee’s remit for this inquiry, but I suggest that it is relevant when taking a rather longer view, particularly taking into account the Government’s decision to abandon the building of a third runway at Heathrow or to expand other capacity at other airports in the south-east—a policy that I support, as the Minister knows. The correct approach, in my view, is to manage demand for short-haul air travel and for us to follow other countries by building high-speed rail capacity. The central part of that approach will be to make proper use of the Channel Tunnel, which is why I think that the sub-committee is on the right lines.

Finally, I want to say something about another barrier to long-distance international rail travel that we have erected for ourselves in Britain. One weekend last month, I travelled by train from Budapest to Berlin and then back to Brussels, passing through five different countries. I was not subjected to a single passport or security check throughout the journey. When I got to Brussels and took the Eurostar to St Pancras, there were three passport examinations and my luggage was searched before I got on board. With great respect to the Government, it is not good enough for them to assert that these checks are necessary because Britain is not part of Schengen, and the

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sub-committee is right to draw attention to that. We are not searched when we board long-distance trains in Britain and I see no reason why the railway should be dragged down to the level of the airlines in this respect. I am disappointed that the Government’s response to the Select Committee report seems to be so inflexible on this issue.

I conclude as I began, by expressing my admiration to the sub-committee for producing a good report, which if implemented would be of real value to the railways, rail passengers and the country as a whole.

5.27 pm

Baroness Scott of Needham Market: I thank the noble Baroness, Lady O’Cathain, for so ably introducing today’s debate, and should like to say how much I look forward to being a member of EU Sub-Committee B as a refugee from my spiritual home of Sub-Committee G.

For much of its long history the Channel Tunnel was primarily thought of as an Anglo-French or Franco-English enterprise, and its construction pretty much entirely predates European Union rail policy. The report highlights very well how utterly that context has changed, and how poorly the single rail market functions across Europe because of what I would charitably describe as patchy compliance with the liberalisation agenda. It is interesting to speculate on whether the tunnel’s current operation itself is a hindrance to growth or a victim of the conformity of much of the rest of Europe to liberalisation.

Personally, although I have a scintilla of sympathy with the view of the Office of the Rail Regulator—which cautioned against revising the treaty of Canterbury on the understandable grounds that the protracted nature of the process would divert attention away from more immediate issues facing the railway—I believe that so much has changed in the quarter century since it was signed that a review is inevitable. The sub-committee has done a great service in highlighting some areas where the governance is working against passenger interests and those of freight. Of course an adverse EU ruling on the tunnel’s arrangements and whether they conform to rail legislation might force the matter, so perhaps I may gently suggest to the Government that they look at jumping before they are pushed.

The stated objective of the EU and, indeed, of the UK Government is to see a transfer from short-haul flights to rail. That is certainly understandable from a climate change point of view. However, setting that aside, it makes sense to make better use of the very limited capacity at our busy airports. Whatever we think about an extra runway at Heathrow or increasing capacity elsewhere—or even “Boris Island”—it will take years to get that sort of extra capacity. Therefore, making better use of rail is a sensible part of aviation strategy. The enthusiasm of Deutsche Bahn to develop routes between Amsterdam, Frankfurt and London is a good example. I hope that progress can be made on the scheme, which is currently mired in what look suspiciously like restrictive practices.

I was compelled by evidence given to the committee by The Man in Seat Sixty-One. It chimed with my personal experience that reducing carbon emissions is

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not a major incentive for people to switch to rail; they are deterred by the stress and time involved in airport checks, the delays to air travel and the extra charges that are often well hidden until you are a long way into the process. To that, I would add the time and expense of travelling to and from major airports. Heathrow Express is a lovely service but—my goodness—at £34 for a standard return fare, it is very expensive. The Man in Seat Sixty-One estimates that these factors account for 80% of the incentive to switch to rail, and climate change only 20%. What I conclude from that is that the desired modal shift will not just happen because people will have an attack of green consciousness but because it will be easier for them. We will have to work on that.

The good news is that clearly there is capacity in the tunnel. I was struck by that two years ago when the volcanic ash cloud halted air travel all over Europe. The Channel Tunnel provided a much needed and very valued way to move passengers at a difficult time. However, it was only able to do so because it was so underused. The initial forecasts of 17 million to 20 million passengers a year proved wildly optimistic, with today’s figure being in the region of 9 million to 10 million. As we have heard, the evidence is that less than 50% of passenger capacity is being used, and 10% of freight capacity. I am not aware of any capacity issues on the road network on either side of the tunnel that would prevent growth in usage, nor on the High Speed 1 side—although, as the noble Lord, Lord Faulkner, said, there are issues in northern France. I hope that the Minister will say whether the Government are addressing these with the French Government.

Competition is undoubtedly the best way to get a good deal for passengers, and I share many concerns expressed in the report about the potential for the current arrangements utterly to distort competition. Access charges are high, and make freight travel in particular simply not competitive with travel by sea—or even, as we have heard, with travel through the tunnel. The access charge alone for a passenger on Eurostar is £32. That will severely restrict its competitiveness against air travel

The decision-making process is riddled with conflicts of interest. One is the involvement of the UK and French Governments through the IGC. The bureaucratic nature of decision-making makes change very difficult. The report is right to call for a more transparent system to determine whether high access charges can be justified, taking into account the fact that Eurotunnel is solely reliant on access charges for its income, and to deal with its historic debt. Of course, it gets no public subsidy. A more transparent system would give clarity about how charges are allocated between users, which is crucial given Eurotunnel’s role as both an infrastructure provider and operator. It may be that independent regulation is the answer.

Yesterday’s press carried reports of the ruling by a French commercial tribunal that approved Eurotunnel’s purchase of three ferries from the liquidated Sea France ferry company. Eurotunnel will continue to employ the 560 former workers and run the services. This may be welcome for the workers, but it adds another layer of complexity to the nature of the

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charging and competition regime. I would not be surprised if the EU competition authorities did not take an interest.

Like the noble Baroness, I am very concerned about the insistence that the tunnel maintain its own safety standards rather than the EU-wide TSIs. This is being used as a barrier to new entrants to the market, and I would like to see more evidence that after all this time the tunnel requires bespoke standards. The comparison with tunnels elsewhere is valid. My noble friend Lord Fearn recently received a Written Answer that stated that there were 64 accidents in the Channel Tunnel last year. Will the Minister say how this compares with tunnels elsewhere, and what it says about the operation of separate standards?

I was persuaded by the evidence that the so-called juxtaposed border controls should be looked at again in terms of the time and cost of operating them to both passengers and rail operators. The feasibility of on-board passenger and passport checks is an advantage that rail has over air which ought not to be lost. I am pleased to see that the Home Office, at least, looks open to it.

I have looked at this issue from the point of view of modal shift—there are many dimensions to it— and I look forward to the contributions of other noble Lords, although I can see that this will be one of those debates in which there is a huge amount of agreement.

5.35 pm

Lord Freeman: My Lords, in common with those noble Lords who have already spoken, I warmly welcome the report. It is a good example of how your Lordships’ House can perform a real service in comparison with the other place. Here, we have a process of thorough examination on an all-party basis—often not on a partisan basis; the Government then respond and then there is a debate. There is no similar process in the other place.

The committee will welcome the attention to detail of the noble Baroness, Lady Scott, and I am sure that she will add a great deal to the work of the European Union Committee.

I particularly welcome the report because it is clear, extensive and comprehensive and has enabled the Government to respond fully and clearly. I add my thanks and congratulations to my noble friend Lady O’Cathain; she has done a marvellous job. I think that many noble Lords who are not in their places today and who do not serve on Select Committees do not fully appreciate the amount of work that a chairman, in particular, puts in. I congratulate her on behalf of my colleagues and, I am sure, on behalf of the whole House.

I pay tribute also to my noble friend Lord Roper. He is no longer chairman of the full committee but he performed a Herculean task with good grace, courtesy and thoroughness. We should not forget that a sub-committee reports to the main committee. The main committee then goes through its report with a fine-toothed comb and sometimes improves it. The whole House owes a great deal of gratitude to my noble friend Lord Roper.

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I shall not repeat or comment on any of the excellent points already made. However, I note that three former colleagues of mine on European Sub-Committee B are in their places. They will be speaking in the debate and I look forward to their contributions. I shall focus on the passenger rail part of the report and also on the Channel Tunnel.

On a lighter note, I notice in the report that some evidence was taken from a frequent traveller—The Man in Seat Sixty-One—of Eurostar. I have to say that that is my favourite seat. I hope that it was not me, because I have now completed more than 100 journeys on Eurostar in the past 10 years.

My first point relates to capacity. I am somewhat sceptical of the comment in the report—I think that it comes from Her Majesty’s Government—that the tunnel is being used at only 50% of its capacity. I am not wholly convinced by that, because if there is to be a better, more frequent service for the passenger, as opposed to freight—and obviously that will also happen during the course of the day—we should not assume that there is a relatively infinite amount of capacity available. I am not asking the Minister to respond to that point; I am merely pointing out that there are limitations. Once you get an electrical fault or a train running slowly through the tunnel, traffic quickly backs up. I also believe strongly in keeping the fast Channel Tunnel service at two hours and 15 minutes from London St Pancras to Gare du Nord. That is a real prize and we are seeing more and more passengers, particularly business people, switching from short-haul air services to Eurostar.

My second point concerns Waterloo, which looks like a white elephant at the moment. Is it likely to be available for additional passenger services coming through the tunnel? I do not know what the long-term plans are so far as British Rail is concerned, but it is an asset which has remained empty for far too long. The reason for switching from Waterloo to St Pancras was the enthusiasm of my noble friends Lord Heseltine and Lord MacGregor for the possibility of linking into a through service to the Midlands and the north of England. Practically that is not possible at the moment, because you have to get off the train at St Pancras and catch a normal Intercity train. I will not ask the Minister to comment because it is a detailed operational point, but it could be a prize.

Like others present in the Chamber, I have suffered from long delays—particularly, it has to be said, at Gare du Nord. We should look carefully at ways of speeding up the process of looking at passports and, if necessary, examining luggage on the train. The police and the authorities have ample opportunity to detain anyone who does not have the correct papers.

I have two final points, although the Minister does not necessarily have to respond to them today, but perhaps he will be kind enough to do so in writing. First, I shall quote from the Government response to the report:

“We are currently considering with France”—

that means the French authorities—

“the most effective way of implementing the EU Interoperability directive in relation to the Channel Tunnel”.

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Have events moved on and what is the present status? Secondly, is there any more up to date information on the proposed Deutsche Bahn passenger service, which I think we would all welcome? I am not clear as to why there is a delay on the part of the German railway authorities and Government in pursuing negotiations for access.

I conclude by taking this opportunity to thank our officials. It is quite rare to do so—certainly it is extremely rare in the other place. But we should be very conscious of the excellent work performed for all the sub-committees, and particularly the main committee, by civil servants. I would be grateful if my noble friend would communicate my thanks.

5.42 pm

Lord Haskel: My Lords, serving on one of your Lordships’ committees is a wonderful way of getting to know your fellow Peers. The depth of knowledge and experience never ceases to amaze me. The noble Baroness, Lady O’Cathain, mentioned the noble Lord, Lord Bradshaw. He really is a walking database on railways. He and my noble friend Lord Berkeley used to be walking encyclopaedias, but of course they do not exist any more. It was a pleasure to serve with my noble friend and everyone else.

Our chair, the noble Baroness, Lady O’Cathain, has a special concern for the consumer, something that no doubt she learnt during her business career. It is that concern about the well-being of the railway traveller moving across European frontiers that is central to this report. An interest that we all share is to promote the environmental friendliness of rail travel. For my part, I find it more convenient and pleasant to travel by rail than by car or aeroplane.

We were very fortunate to have John Turner and Michael Torrance, and then Mark Davies, as our clerks and policy advisers. They were towers of strength and I thank them.

The conclusion of our report has been reflected in what a number of other noble Lords have said. A lot more can be done to make cross-border rail travel in Europe easier, quicker, cheaper and more convenient. What is required is a much greater sense of urgency and priority—in Whitehall as much as in Brussels. The framework is there, the talking goes on, but the action is slow. For instance, the principles are agreed but member states are not implementing the railway packages equally. For this to happen, the European Railway Agency needs to be a lot more effective. All this discriminates against new access to the rail infrastructure by creating technical and administrative barriers, which vary from nation state to nation state. This is what creates the barrier to international operations.

A recast of the first railway package designed to establish a single European railway area is being discussed. The UK National Parliament Office in Brussels reports that a fourth railway package has been drafted to make things even better, but it all depends on the agreement to be reached on the recast of the first railway package. In their response to our report, the Government are obviously as frustrated as we are that the Commission is not using its powers to enforce the

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first railway package. Have the European Commission and the European Parliament taken any further action to enforce this package? We were told that they were due to debate this.

The Independent Regulators Group seems to be working. In their response, the Government tell us that the group has a full programme of monitoring of work and developments. If I may say so, it at least is travelling in the right direction. The work is due to be completed this year. Can the Minister tell us how it is going?

It is right to ask why this is important. What is there to be gained? The answer lies in figure 3 on page 35 of our report: the core network map for 2030. According to this map, by then we will be connected to an impressive rail network throughout the European Union. If it is efficient, united and convenient, it will provide a service that will attract the consumer, help the single market and help cut fuel emissions.

As my noble friend Lord Faulkner explained, our connection to this network is through the Channel Tunnel, and this connection is crucial. The impression that we got from the witnesses was that the tunnel is not working well. First, our graph in figure 2 on page 28 shows that the number of passengers is levelling off. Incidentally, the volume of freight is decreasing, which is very worrying.

As other noble Lords have said, we were surprised to learn that there is unused capacity through the tunnel. My noble friend Lady O’Cathain gave us the numbers. The noble Lord, Lord Freeman, doubts this but the evidence we had from our witnesses was pretty definite: there could be a lot more passenger trains going direct to other cities in Europe apart from Paris and Brussels. Yes, a service to Germany is planned, but the start seems to be getting later and later. They are now talking about 2015.

Since our report was published, Eurostar announced that it was “eyeing”—whatever that means—adding up to 10 new routes from St Pancras to Holland, Germany, southern France and Switzerland. This is because with HS1 you can actually save time compared with flying when travelling from city centre to city centre. But it is talking about 2016 or even 2017, even though HS1 has now been operational for two years. This has come about through competition. It will only happen because Eurostar is going to lose its monopoly on high-speed services through the Channel Tunnel. Even so, I am sure that noble Lords will agree that this is disappointingly slow.

Are there any other reasons why this extra capacity is not in use already? The noble Baroness, Lady O’Cathain, gave us several answers. I agree with her that the impression that we were given is that access charges are high and unpredictable. My noble friend Lord Faulkner put the figure at £12,000 from some briefing that came from Eurostar, but I share with the noble Baroness, Lady Scott, the impression that they are unpredictable. As we say in our report, new entrants will be deterred if the access charges are not fair, predictable and readily available.

In their wonderfully bureaucratic response to the question of access charges, the Government recommend caution because of the complexity of making pricing

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judgments. All I can say is that other regulators make pricing judgments every day of the week, in water, electricity, gas and even within UK railway travel, so why not with the Channel Tunnel? This must be a major factor in the underutilisation of the tunnel and the lack of competition.

Other noble Lords have mentioned border controls. It is a question not only of immigration but of terrorism, both of which are important factors. Integral with this is the right to cabotage, which would help generate more demand and make international services profitable. Perhaps the Minister can say whether anything is happening about this.

Witnesses told us that interoperability is a major factor. The European Rail Agency really has to be more proactive in this area. The Government in their response agree, saying that the European Rail Agency’s work on interoperability is planned to conclude in summer 2012. Well, the calendar, if not the weather, tells us that it is now the summer. What is happening?

Ticketing is another barrier. You just cannot buy a through-ticket from one European railway station to another. That is understandable if it is from one minor station to another, but it applies also to tickets from one major terminus to another. You still have to buy different tickets for different parts of the journey and, of course, there is no consistency in price. Booking cross-border tickets on the internet is virtually impossible. We heard some wonderful evidence from the man from the website The Man in Seat Sixty-One, who explained the intricacies—his evidence also impressed the noble Baroness, Lady Scott—and he works full time advising people on how to book tickets across Europe, particularly on the internet. He makes a living out of it.

Passengers’ rights also need to be clarified, even though, as the Government point out in their response, passengers on international rail journeys within the EU are covered by specific conditions. However, it is still unclear what happens if you miss a connection because your train is late and the ticket price is different on the next train.

We have been assured that all these problems—and others which I have not mentioned but other noble Lords have—are being tackled by the intergovernmental committee which operates through the treaty of Canterbury, and that consumers’ concerns are paramount. However, I repeat that my impression, like that of other noble Lords, is that the whole thing must be speeded up. It is slow because there is little competition both through the Channel Tunnel and across international borders; it is slow because officials, by definition, are too distant from the consumer.

If the Government can find more ways of introducing competition, there will be a much greater sense of urgency initiated by the operating companies. Then we will all benefit from a fast and efficient passenger railway system across Europe that is both consumer-friendly and environmentally friendly. The potential is there; the framework is there; it just requires the effort.

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5.54 pm

Lord Berkeley: My Lords, first, I declare an interest as chairman of the Rail Freight Group and a board member of the European Rail Freight Association. I spent 15 years in my comparative youth building the Channel Tunnel, and I recall having many debates with the noble Lord, Lord Freeman, who was one of the best Transport Ministers I can remember. We dealt with a lot of local problems and, sometimes, national problems. It was a pleasure to work with him and is great to see him in his place today, because he started many of the things that we have today.

I am sorry that I was not involved with the forecasting, which many noble Lords have criticised, or negotiating the contracts, which I am about to criticise, but there we are. We have had one of the best informed debates I can remember. There is remarkable expertise in this House and remarkable unanimity of view, which we can probably sum up as saying: it is time that the Government got moving on this to make the changes that this excellent report has recommended. I support everything that is in it. Of course, I gave evidence as well.

I have just one issue on capacity before I get into structure, which is my main subject. The noble Lord, Lord Freeman, will remember lots of debate about capacity through the tunnel, but capacity in a line such as this depends on all the trains going at the same speed. The original capacity design was 24 paths an hour in each direction which, if the signalling was upgraded, could be increased to 30. You could not run 30 trains, but you could run with a few spaces. The noble Lord will probably remember that Eurotunnel announced a few weeks ago that it will speed up the shuttle trains to keep up to the same speed as the Eurostar to get more trains through the tunnel during the Olympics. There is plenty of capacity there and I agree with the noble Baroness, Lady O'Cathain, that very little of it is being used for the through services.

Another issue is immigration. I shall not speak about that for very long, because I said quite a lot about that during the Second Reading debate on the Crime and Courts Bill, and the noble Lord, Lord Henley, has agreed to meet me before Committee on Part 3. I sense that other noble Lords may wish to participate in such a meeting, and I shall be in touch, because I agree that the current situation is absolute chaos and, frankly, an insult to visitors coming to this country.

The report rightly states that the Channel Tunnel should be seen as part of the European rail infrastructure. As many noble Lords have said, it is good for economic and cost reasons that the tunnel should not be seen as a barrier to traffic and trade. There is a long way to go before that is achieved both in the tunnel and across Europe. The noble Baroness, Lady O'Cathain, rightly talked about fragmentation.

I shall speak primarily about the structure, which I think is blocking change at the moment. The first railway package, completed in 2001, set a structure and regulatory changes to make the European railways more competitive, cost-effective and interoperable. Thirteen member states are currently being infracted against by the Commission for non-compliance with legislation

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that they agreed to in 2001, which is incredible. They include the big ones: Germany, France—my noble friend Lord Faulkner referred to the problems in France; he is absolutely right—and Italy.

I was interested in the evidence to the committee from the Italian railways, who said with one breath that the freight in Italy has been liberalised and everything is fine and that the next thing will be international passenger transport, but in fact—this is happening in France as well—they are complaining bitterly about what is happening in other countries but making very sure that no competition can happen in theirs. As just one example, the Italian Government and the incumbent railway, FS, are trying to prevent other operators getting access to tracks and terminals. It is encouraging its Government to introduce rules saying that all operators must provide mobile rescue cranes every 500 miles—not one set of cranes around the country but each operator having to have his own set of cranes. This is of course because the incumbent has a lot of old cranes and nobody else has. Every train will have to have two drivers, because the FS ones have two, but nobody else needs them—the passenger ones do not— while no leased wagons may be used. They introduced this legislation at zero notice, so in theory if the independent operators were running a train on the main line with leased wagons, they would have had to put the brakes on, stop and block everything. This has been going on for the past two years, while the Italian authorities and the chairman of Italian railways go around Europe saying, “We are fully liberalised”. They are not.

Where does the Channel Tunnel come into all this and does it comply with the first railway package? The committee thought not but the government response said that it does. In paragraph 135 of the response to the report, the Government say:

“The UK complies with the First Railway Package in full”—

in full—

“both in respect of the domestic network and the Channel Tunnel”.

Well, they do on the domestic network but the Commission does not think that they are on the Channel Tunnel, because it started infraction proceedings against the UK and France in February 2011. It is odd that the government response did not mention this. When the Commission is infracting a member state, surely it is relevant to the Government’s response to a report. I have all the papers; I could have had a few more, except that they rejected my freedom of information requests, but I have quite a few. The first concerns the subjects of the infraction. I shall summarise them because they are rather long but they are important.

The first concern is on the “independence of essential functions”, which means that the infrastructure manager is not owned by the same company as the train operator because that operator otherwise gets preferential treatment, as happened in Italy. The second is that there should be separate accounts for infrastructure managers and operations and that has not happened, according to the Commission. The third is on rail access charges, which a number of noble Lords have mentioned and to which I shall come back because they are very high. The fourth is on an independent regulatory body. Until about now, it has not been independent because

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the regulator has been part of the Department for Transport, which owns parts of Eurostar. Our Government need to be congratulated because they are now moving the whole of the UK side of the intergovernmental commission to the Office of Rail Regulation—but of course the French Government have not done that yet. Finally, there is the issue of “capacity allocation”, which is again not independent. The Commission’s paper is called an EU pilot and it is digging very hard into the detail. I would be very interested to know from the Minister whether the Government are resisting any requests for information from the Commission or are being proactive in response. Similarly, do the Government accept that the first railway package applies in full to the Channel Tunnel?

Turning to the access charges which other noble Lords have mentioned, article 8 of directive 2001/14 is the relevant one. I was a little disappointed with the committee’s response. It seemed to think that because Eurotunnel is in the private sector it should be able to,

“set access charges at a market rate subject to their obligations under EU law”.

That is right; it should be able to set its charges under those obligations, which I will come to, but I would submit that its being in the private sector is not particularly relevant. In their response on Eurotunnel, however, the Government say in paragraph 140:

“EU legal requirements have been fully implemented”.

I would challenge that.

Other noble Lords have spoken about the charges, but there is more to it than that. If we look at the five issues the Commission has put in the pilot, Eurotunnel has not demonstrated that its infrastructure management is sufficiently separate from its freight operation, its passenger operation or from the freight and passenger shuttles. The shuttles are exempt from the legislation, but they have to be looked at separately. There is no separation of accounts. There is some progress in the network statement, but not enough. I have mentioned the regulatory body and that the access charges are too high, so basically the UK gets one out of five and France gets nought out of five, which is a pretty poor record 11 years after the first railway package came into effect.

I do not accept the committee’s view that access charges should come down in the medium term. There is much more to it than that. Several noble Lords quoted the charges. I shall quote some in a slightly different way. The charge per train kilometre for a Eurostar is £36 on HS1, £13 on the high-speed line in France and £225 on the Channel Tunnel. In the tunnel, it averages about 10 times the charge on the other side. For freight, the evidence that MDS Transmodal submitted to the committee was that the charge is about £3,000 a train—it varies quite a lot. It argued that it should be £1,000 to attract significantly more traffic, bearing in mind that there are about five freight trains a day going through at the moment. If you stand on the M20 at Ashford and count the number of trucks, you could fill 200 trains a day. I suggest that there is something wrong there.

How is the charge arrived at? This is the problem. There is a rail usage contract that dates back 1985. The noble Lord, Lord Freeman, may even remember

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it. It was designed to give a government guarantee to Eurotunnel from the two railways: British Rail and SNCF. The charges were based on full cost recovery—fine—fixed costs and variable costs plus a mark up. The problem is that the two companies that signed, which are now DB Schenker and Eurostar, pay the charges on the basis of the rail usage contract, which has now been turned into a network statement. If anybody else comes along, like Deutsche Bahn, it will be paying the same amount, but will also be paying a charge that reflects the fixed costs of the tunnel. Something in me says that Eurotunnel is going to get the fixed costs paid twice. That does not seem right. The whole thing is a complete mess and it needs completely restructuring on the lines of Article 8 of Directive 2001/14. There is a marginal cost, a fixed cost and an allowance for financing with a calculation of how much the market can bear, all supervised by the regulator, which is a joint regulator independent of government. I can go on about fixed costs and fire suppression, but I think that, in interests of time, I had better not.

What we have here is a wasted asset for passengers and freight that is, after all, the mode of transport supported by the Commission, the UK Government and, no doubt, the French Government. The committee recommended root and branch restructuring of the Channel Tunnel. The noble Baroness, Lady O’Cathain, referred to that. The noble Baroness, Lady Scott, talked about competition. She is absolutely right. We all believe in fair and transparent competition. This is what Sir Roy McNulty is saying about the UK, and it is no different. If you want growth, you need competition, but any competition to make it work must be fair and transparent. I hope that the Government will set an example to all the other member states that are failing and take this forward, take on the recommendations of the committee and let us see some urgent change.

6.09 pm

Lord Walpole: Oh dear. All I can say is: how do I follow that? That is the expert. I will try. My family were Members of Parliament for Kings Lynn on and off since about 1350 until the end of the 19th century. I wondered what they felt about the possibility of a Channel tunnel, and indeed I know perfectly well what they thought: they preferred to use the Hanseatic League and did not want somewhere for the French to be able to march over to Dover.

The report and the Government’s response to it are an invaluable record of the position on 8 December 2011. That is my birthday. It is also the day of the Immaculate Conception. I do not know whether noble Lords ought to draw a line between the two. The noble Lord, Lord Berkeley, did not mention immaculate conception, did he? No.

Lord Berkeley: I did not draw a line, either.

Lord Walpole: Over certain distances, there is no doubt that the train should be better than the air. It should be cheaper, should be better for the environment, should be better for time and should be more comfortable, though whether or not that is true, I do not know. The

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report in front of your Lordships contains, in box 2, the treaty of Canterbury. Whatever anyone has said so far, after 25 years that treaty is out of date and should be looked at very carefully. I think that someone has already drawn attention to the fact that on page 28 there are unimpressive figures for passengers and freight; certainly those for freight are totally unimpressive.

On page 35 there is the core network map of what the railway is going to look like in 2030. Once again, there is no route to East Anglia or the West Country, nor any route to Scotland north of Edinburgh. Has anyone heard of Swindon, Bristol, Truro, Harwich or Felixstowe? None of those will be on decent railway lines. The present capacity, shown in paragraph 74 on page 29, of less than 50% of the amount of passengers that could be taken and less than 10% of the freight, is quite extraordinary. Perhaps it is too expensive per train per kilometre.

In our village at home, there is a gentleman, now retired, who owns his own articulated lorry and spent his life going all over Europe picking up trailers and bringing them back. He said that without doubt he would rather go on the ferry than through the tunnel. Why? Because it was easier to get on the ferry—not that there is any difficulty getting on to the train, but you then go and sit in some nasty little carriage up at the front, and a few moments later you arrive in France. If you go on a ferry you can have a nice little relax, you can fill your—you know what I mean.

Lord Berkeley: Flask.

Lord Walpole: Yes. You can get everything right. I like railways and I like the tunnel, but if you go from Norwich to Liverpool Street, you go to a place called Stratford. You cannot change at Stratford on to anything else; you have to get a train either to Ebbsfleet or to St Pancras. That is extraordinary. I should think that I have used the tunnel about four to five times a year—in other words, eight to 10 journeys a year—ever since it started, both by car and by Eurostar, and I must say that I have always enjoyed it because one has got the hang of how to enjoy it.

Through ticketing simply must be introduced. When my ancestor was 200 and I was 60 in the same year on the same day, we decided that we would go to The Hague. How many tickets did we need for that? Well, you work it out. We started on Eurostar and ended up on some Dutch train, which was superb—but, yes, we will not go into that.

Now, finally, I say thank you very much to the noble Baroness, Lady O’Cathain, for being a very good chairman, bullying us all, making us speak, and helping us very much indeed. I also say thanks to our clerk and to Elaine Morgan, who were 100% behind the committee. We could not have acted without them.

6.16 pm

Lord Brooke of Alverthorpe: My Lords, I commence by thanking the noble Baroness, Lady O’Cathain, for keeping us on the rails all the way through this exercise, and keeping us pointed in the right direction in a non-bullying way. I thank, too, our clerks, who gave us

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such great assistance during the course of the committee, and I particularly thank colleagues who have left the committee since we concluded the report, as well as the new ones who have joined us. I also express my gratitude to all the people who provided evidence to us, both orally and in writing, which was very useful indeed.

It is some months, of course, since we concluded the exercise, the report appeared and we got the Government’s response. It is quite interesting to see what has happened in the mean time. I have gone back and reread our report and the Government’s response, and I have also picked up on one or two things on the internet that have happened. I see, first, that there has been quite a major breakdown—a health and safety issue in April in the tunnel. Secondly, immigration, a topic which we touched on, has moved up the agenda significantly since we addressed the issue last year. I think we found that, in retrospect, the Minister’s response at that time was somewhat complacent. She said that we will have sorted it out by the time that we get round to Deutsche Bahn extending the run through to Amsterdam and into Cologne; whereas the reality is that, as has now been indentified, many people have been using the existing train system under current arrangements to come into the country illegally. This needs to be addressed with urgency from a variety of standpoints, as we have already heard.

Lord Berkeley: Is the noble Lord aware that Deutsche Bahn has said that it is not going to go ahead with its service until the immigration situation is sorted out?

Lord Brooke of Alverthorpe: I was not aware of that, my Lords, but it is a very important and significant point indeed. This will presumably be quite an obstacle to making progress and introducing the new extended lines for which many noble Lords have been calling.

More recently, and thirdly, we have seen the announcement—the noble Baroness, Lady Scott, mentioned it, and I think that my noble friend Lord Berkley may have said more on it—about allowing Eurotunnel to take over SeaFrance’s cross-channel vessels. This takeover occurred within a matter of days and raises, as the Financial Timessays, significant implications for competition and, in turn, charges, which I will come back to in a moment. My major point is about the charges.

Fourthly—and this is good news—I see that the number of foot passengers travelling through the tunnel over the past few weeks has increased significantly, largely because of people wanting to come and participate in the Jubilee celebrations. All those of us who want this to be a successful venture will hope that that will continue into the Olympics and beyond. Those are the changes that have occurred since we concluded our report.

In two years, a major celebration will take place. In 2014 we will celebrate 20 years since the Channel Tunnel first opened and all the worthy work that my noble friend Lord Berkeley did on its construction. It was a truly amazing event when the tunnel opened. It was a great venture, a great vision and the fulfilment

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of the marvellous technical expertise that went into it. However, regrettably, as others have said, as yet we have failed completely to deliver the fulfilment of that vision. This came from the evidence of the people who came before the committee. They were almost unanimous in saying that the tunnel has not delivered all that was hoped of it and that there is still a long way to go, even though it is such an amazing piece of infrastructure that is capable of delivering such public good, not just for the UK and France but over a much wider front throughout Europe.

The witnesses—even those from Eurotunnel, with their projections—were also unanimous in saying that we still do not have enough foot passengers travelling on the train and we are well short of how much rail freight there should be. The figures are very low indeed in comparison with the original projections. Indeed, as my noble friend Lord Haskel pointed out, they have been falling off in recent years, which is of great concern. Interestingly, our witnesses all felt that this was not good enough. They all felt that we should be trying harder and going for growth. I was very pleased that the noble Baroness, Lady O’Cathain, introduced the debate by pointing to the importance of growth in this context, both for this country and for Europe.

Our report endeavours to be constructive, to identify the areas in which performance has been falling down and to suggest a significant number of solutions to the problems. I regret that the Government’s response was not as positive as it might have been. I rather sensed that our chairman felt the same. Their response did not have the enthusiasm and energy that the committee showed in addressing the topic. This came through both in the public performance of Ministers and their supporters when they came before us and in the written document. No doubt the noble Earl, Lord Attlee, may put me right on that when he responds in his usual way.

I found it quite surprising that, when we took evidence from the Minister, she encouraged us by saying that our report would provide a push in the right direction. That hardly indicates a strong commitment. I hope that we will get some movement on this over the next two years, so that when we get to 2014 we will have seen some substantial changes.

In fairness to the Government, perhaps in retrospect we should have invited the Mayor of London to give evidence. He would have talked about growth, London and the importance of getting jobs for London. We would have pointed out to him that the Channel Tunnel has an important part to play in such growth. Had we persuaded him that it was an issue on which he should campaign, we might have made more progress with the Government, given the unusual way in which he can bring pressure to bear on them. Maybe that is something for us to bear in mind in future.

I come back to the importance of the report. The Government have made some progress in addressing the governance of the IGC. This has been slow but at least the introduction of representatives from the Office of Rail Regulation, and the enhanced role that is envisaged for them in future, is a step in the right direction and very positive. I was certainly very impressed by the evidence that we heard from those representatives who are now on the IGC. They identified areas in

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which questions were raised about the performance of Eurotunnel. Mr Kogan, in particular, asked whether Eurotunnel’s charges were justifiably high or inexcusably high. I believe that that is at the heart of the whole issue of whether we move forward with the tunnel. He also raised questions about the absence of a performance regime for Eurotunnel. In the UK, any company of that size that did not have a performance regime in place would be severely criticised. Again, this is an area where Eurotunnel needs to move forward and ensure that it is open and clean about where it is going. Mr Kogan told us that the IGC had been working on some of these issues for two years. As he appeared before the committee last October, now it is close to three years.

I have looked at the latest reports on the internet. The last report that the IGC produced related only to 2010 and did not appear until September 2011. We are still waiting for the report on 2011. In particular, I will leave the Minister with a question which he might not be able to answer today. The Government’s response to paragraph 141 states:

“The IGC is currently investigating the level and appropriateness of Eurotunnel's charges and its Joint Economic Committee published a report on the first phase of its work in October 2011. Further work is underway but will take some time because of the complexity of Eurotunnel’s accounting structures and financial flows. Until those investigations are concluded, and on the basis of the evidence currently available, we would recommend caution in assessing whether the level of the charges is appropriate”.

I have looked at the website but can find nothing about what is happening on that front. I have done some research elsewhere to find out what is happening. It is now close to three years since this work was first put in place. If the Minister cannot reply today, will he please reply to the committee in writing and tell us when we can expect that research to be concluded so that we can see it? On that basis, I believe that we will have a foundation on which we can move forward profitably.

6.27 pm

Lord Davies of Oldham: My Lords, first, I congratulate the noble Baroness, Lady O’Cathain, the chairman of the committee, on this report and acknowledge the enormous amount of work she has been involved in in producing this significant document. Proof of the success of this work is the extent to which she has been backed by noble Lords from her committee who have made such telling contributions today. I shall refer to those in detail in a moment.

Ordinarily, these debates tend to revolve around the participation of committee members as they see the conclusion of their work and want to see the Government’s response. The distinguishing feature of this debate is that there also have been contributions from noble Lords who are not members of the committee but who have made significant points which I hope the Minister has taken on board. In my short contribution, I want to dwell on one or two of those points in order to clarify the issues for the Minister and, therefore, aid him in his response to the committee’s proposals.

If I have one criticism of the report, it is probably in its title. It looks more like a statement of aspiration than a potential achievement. The report identifies

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two things. The first is that completion is a long way away when we do not have full implementation of the first stage with regard to the Commission. Secondly, it concentrates on the specific British dimension of this work—the Channel Tunnel—and is far from satisfied with the present arrangements as regards that significant enterprise. Of course, we all engage with the committee in its broad objective. There is a huge advantage and benefit for the country if we can extend cross-border rail travel. In terms of travellers’ convenience and the broad environmental issues, we all know the potential advantages of rail over aircraft. That underpins the aspiration behind the report.

The Minister will recognise that committee members identified that the government response is somewhat lacklustre. It is particularly lacklustre on the most trenchant part of the committee’s report, in paragraph 136, which says:

“In the long-term, we support direct governance of the Channel Tunnel by the UK and French national regulators”.

That is the objective for our part of completing a dimension of our contribution to the single market. I should be grateful if the Minister would address himself to those points, although whether he accepts that the treaty of Canterbury can be revised in such a dramatic form is an interesting question.

What has been identified in the debate are the frustrations born of the existing structure for the Channel Tunnel, to which my noble friend Lord Faulkner referred, along with the noble Baroness, Lady Scott, in mentioning the issue of access charges, and my noble friend Lord Berkeley with his particular expertise, in discussing the direct operations of the Channel Tunnel.

The other dimension also needs to be taken fully on board. It was my noble friend Lord Faulkner who dwelt most significantly on these matters. I refer to how limited the development of the single market is in so many countries in Europe, even those with railway systems that we all applaud. We should approach the European position with a little degree of modesty. After all, there are some excellent rail systems in Europe, and it is the case that the British system compares ill in some crucial aspects. On the one highly significant feature—the report demonstrates that the concern is about the customer—the passenger in Britain pays 30% higher fares than in many European rail systems. So we ought not to think that we can easily lecture other systems on improvement in circumstances where our own house is not entirely in order. It is very likely that we will be discussing these issues against the backdrop of ever-increasing fares in the British system.

There is one other dimension on which the Minister will need to tread with some degree of care. Of course, we all recognise the necessary emphasis in Britain on border controls to preserve the protection of the public, but it is also the case that the border controls at present work in such a way as to produce the maximum irksomeness for the average passenger without, from what one can see, very significantly enhancing the security dimension.

These are factors that should concern us. Tribute has already been paid to the noble Lord, Lord Roper, with regard to the European Union Committee over many years. From that work, we know that the reports

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of this House are taken seriously in Brussels. But on rail we will need to force the issue in a very sharp way indeed as it is clear that there is an awful backlog to catch up on. We must expect a more positive response from Europe, but that above all means that we must have government support and a government initiative that is clear on its objectives and determined to ensure that, even if we cannot complete the European rail market in the immediate future, we can take many more significant strides than we have done in recent years.

6.35 pm

Earl Attlee: My Lords, I start by congratulating the committee, which was so ably chaired by my noble friend Lady O’Cathain. The Government welcome the sub-committee’s thorough report on the European rail market and the role of the Channel Tunnel and have provided a full response. As ever, I am on a strict timetable.

We believe that a truly open, fair and liberalised market would increase competition in international passenger services across the EU. We support the Commission’s overall aim of clarifying and strengthening the regulatory framework for rail access through the first railway package recast. In particular, we endorse the need to ensure that there are adequately resourced and properly independent regulatory bodies in order to facilitate market entry and competition.

The Government recognise that the Channel Tunnel is a unique piece of international transport infrastructure and that it is in the country’s interests that it remains in operation. By virtue of the 1986 treaty of Canterbury and the ensuing concession agreement, the Government are directly concerned with the Channel Tunnel.

The UK strongly supports the growth of cross-Channel rail services. The provision of international services and their service patterns is a commercial matter for operators. In order for a train to transit the Channel Tunnel, the operator needs to comply with the relevant European, national and Channel Tunnel-specific requirements.

My noble friend Lady O’Cathain and other noble Lords talked about the proposed Deutsche Bahn service. DB applied to the intergovernmental commission in October 2011 to amend its Part B safety certificate, which covers management of safety issues, to include operation of passenger services through the tunnel. Since the intergovernmental commission has been unable to reach a decision, the application has now been referred to the British and French Governments for consideration. That process is ongoing. Deutsche Bahn will also need to obtain an interoperability authorisation to place its new trains into service in the tunnel. Although IGC officials from the UK and France have been working positively with Deutsche Bahn and Siemens to help them prepare the necessary dossier, as yet no formal submission for authorisation of new rolling stock has been made to the IGC by either Deutsche Bahn or Siemens.

The noble Lord, Lord Brooke of Alverthorpe, and, I think, another noble Lord asked me about the purchase of SeaFrance Ferries. It is a matter for the competition

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authorities, either DG Competition at the EU or the Office of Fair Trading, to determine whether any change in market dominance raises competition issues. The noble Lord, Lord Brooke, also asked about the 2011 report of the IGC. I do not expect inspiration to arrive and therefore I will have to write to the noble Lord.

My noble friend Lady Scott of Needham Market talked about modal shift for passenger and freight. We recognise that modal shift from air and road to rail can generate important environmental and congestion benefits. However, rather than trying to force people away from car or air travel, we are working to support sustainable travel choices. A number of barriers can prevent behaviour change, including powerful ones such as habit.

Studies have indeed indicated that the Channel Tunnel has spare capacity to accommodate growth. Although there have been indications that the rail freight share of the cross-Channel market would be higher if rates were lower, pricing judgments are inevitably subjective and it is always difficult to make accurate volume and revenue forecasts. However, in partial answer to the question from my noble friend Lord Freeman, there is spare capacity for growth, as about 50% of capacity is being used at the moment.

The noble Lord, Lord Faulkner of Worcester, suggested that access charges for Eurotunnel are too high, and other noble Lords said as much. We have no clear evidence that Eurotunnel’s charges are inappropriate. However, the IGC is currently investigating the level and appropriateness of Eurotunnel’s charges, and its joint economic committee published a report on the first phase of its work in October 2011. Further work is under way but will take some time. Until those investigations are concluded, and on the basis of the evidence currently available, we would recommend caution in assessing whether the level of charges is appropriate.

In answer to another question from the noble Lord, Lord Faulkner of Worcester, the Government support long-distance high-speed rail. At present, services on HS1 and the Channel Tunnel are relatively inaccessible for those outside London and the south-east. By providing direct access to the wider European network for services from Manchester, Birmingham and other cities, a link between a national high-speed rail network and the current HS1 could address this. In January this year, the Government announced that phase 1 of the HS2 network will include a direct link to the continent via the HS1 line to the Channel Tunnel. The Government’s view is that the strategic case for a direct link between the proposed high-speed rail network and the HS1 line to the Channel Tunnel is strong.

My noble friend Lord Freeman asked about the Waterloo International terminal. I had been briefed on this but, sadly, some time ago. My noble friend will recall that the connection to HS1 was slow, and there are also technical issues regarding bringing the platforms into domestic service.

I should like to say a few words about the role of the Channel Tunnel Intergovernmental Commission and the IGC legal framework and governance. The governance structure for the Channel Tunnel has been

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sufficiently flexible to accommodate subsequent developments in European, UK and French law and regulation, and it is expected to continue to be so. The Channel Tunnel Intergovernmental Commission and the Channel Tunnel Safety Authority are currently seen as providing an effective structure for regulating the Channel Tunnel in line with the European framework. If a need is identified to improve the effectiveness of the IGC or to adjust the powers available to it as regulator, the Government will promote any necessary legislative changes.

The speed of IGC decision-making is conditioned in part by EU regulatory processes and requirements and by the processes and responses of the concessionaires and other stakeholders. The IGC process with regard to the authorisation of proposed new services through the tunnel cannot start until the relevant documents have been submitted.

I think that I will have to part company with my noble friend Lady O’Cathain and the rest of the committee at Canterbury. The Channel Tunnel is a binational infrastructure and therefore needs some form of binational governance. This is necessary regardless of which authorities have, in law, the regulatory functions. Even when the IGC is exercising legal powers in its own name, its decisions are, in practice, informed by discussions between the French and British national authorities. In this connection, we are working with our French colleagues to conclude as soon as possible transposition of the revised railway safety and recast railway interoperability directives for the Channel Tunnel. We see no need to renegotiate the treaty, and I suspect that the French have no appetite to do so either, as observed by my noble friend Lady O’Cathain. The noble Lord, Lord Davies of Oldham, referred to the treaty and to direct governance of the tunnel but I do not think I heard him say what the policy of Her Majesty’s Opposition is.

I turn to the tunnel-specific safety rules for passengers and freight. The IGC has made significant progress in reviewing its rules to check that all the safety requirements currently in place continue to be justifiable on safety grounds and to remove those which are not. The IGC will continue to hold this view unless the evidence demonstrates otherwise.

The tunnel authorities and Eurotunnel are working together to address the consequences for the tunnel’s rules of the opening of the European rail market. This includes a programme of work to address the European Rail Agency technical opinion, which has already led to a number of requirements being removed. The UK Government accept the principle that the IGC must justify, by robust risk analysis, any requirements that are additional to the European harmonised technical specifications for interoperability.

The safety concerns that underpin the tunnel’s safety requirements reflect the difficulties of getting firefighters in and other people out of a 54-kilometre undersea tunnel in the event of a fire. My noble friend Lady O’Cathain asked when the work on the TSIs will be completed and whether the TSI requirements will be rescinded. The Safety in Railway Tunnels TSI is expected to be revised in mid-2013. Some specific requirements in the Channel Tunnel rules have been removed—for

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example, the 30-minute running time for freight locomotives. Other remaining tunnel rules are expected to finish in September 2012.

I turn to economic regulation of the Channel Tunnel. The UK considers that the Channel Tunnel’s regulator’s independence from any railway undertaking is properly preserved as regards the UK. No one in the UK IGC delegation or working at the Office of Rail Regulation in support of the IGC has any responsibility for Eurostar. Within the Department for Transport, policy responsibility for Eurostar is vested in a separate command that has no locus in or responsibility for the IGC.

My noble friend Lady O’Cathain, the noble Lord, Lord Davies, and many other noble Lords talked about border and immigration controls. Rail liberalisation presents a number of border control challenges which the Home Office and the border force are seeking to resolve with colleagues from across government, the police, rail operators and the Governments of other European countries. It is occurring against a background of rapid changes in border control technology, which will help to meet some of those challenges. But these challenges will only become more significant with the increase in international services. That is recognised in respect of HS2.

Lord Berkeley: Will the noble Lord explain what border controls are planned for HS2? That seems a bit odd as I thought it was within the UK.

Earl Attlee: My Lords, I think the hope is that passengers will get on HS2 on an international journey further up the country, maybe from Birmingham.

The noble Lord, Lord Faulkner, asked about Schengen. The position of the UK outside Schengen means that exit checks also need to be completed for all passengers leaving the zone prior to immigration arrival controls in the UK. The noble Lord, Lord Berkeley, raised the UK’s possible infraction for non-compliance with the first railway package in respect of the Channel Tunnel. I am unable to discuss the infraction procedures with respect to the first railway package and the Channel Tunnel but we consider that the railway usage contract does not breach the requirements of directive 2001/14—the first railway package—for the duration of a framework contract, and complies with Articles 17.5 and 17.5a in that it relates to a uniquely large-scale and long-term investment which is covered by contractual commitments. The noble Lord, Lord Haskel, also asked about the Commission taking further action against member states for non-compliance of the first railway package. The European Commission is currently taking infraction action against those member states that have not correctly implemented the first railway package.

I am grateful for your Lordships’ comments and, where appropriate, I will certainly draw them to the attention of my right honourable friend the Rail Minister, Theresa Villiers.

6.49 pm

Baroness O'Cathain: First, I thank everyone who took part in this debate. It has been a fantastic debate and the enthusiasm of every single Member, whether

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or not they are members of Sub-Committee B was palpable. I think that we achieved a lot in bringing the report to this state. However, as I said in my introductory remarks, we as a committee could never have done it without the help of the clerks and policy analysts. My noble friend Lord Freeman also paid tribute to their work. It was a great joy to have the noble Lord taking part in this debate because he was the previous chairman of Sub-Committee B and gently reminded the whole House of the debt we owe to the noble Lord, Lord Roper, for the gentle but firm way in which he guided us through paragraph after paragraph of all the reports that came before him. He is an amazingly hard worker and a very nice person to work with. I thank him.

Noble Lords spoke today in so much detail that I know I will learn even more about the Channel Tunnel by reading Hansard. I was particularly thankful for the history lessons we were given. The one from the noble Lord, Lord Faulkner, was terrific. I was about to say that he was not in his place, but he is in a superior place—on the Woolsack. He took us back to 50 years ago and made me feel that perhaps there is nothing negative about being a techie. We also had a history lesson from the noble Lord, Lord Walpole, and I doubt if anybody in the Chamber will now forget the date of his birthday. In various meetings of Sub-Committee B, the subject of Norwich and the trains of East Anglia came up, and he was absolutely right—it is a disgrace that we do not get on and use and improve the railway system.

As the noble Lord, Lord Davies of Oldham, said, one has only to go across to Europe to see how trains can work. We in this country have the enthusiasm to try to get the Channel Tunnel to work properly. It is not doing so at the moment. That is not a destructive critical point; it is being absolutely constructive, and our report was written on that basis. I look forward very much to the redraft of the first railway package. Instead of talking about the fourth, let us get on with it.

I also thank the noble Baroness, Lady Scott, who has only just joined our committee but who has taken on board the report that was written long before she joined. She will be a marvellous member, judging by her contribution today. I thank and welcome her.

I referred to the noble Lord, Lord Berkeley, in my speech. The fact that he and the noble Lord, Lord Bradshaw, went across to Switzerland and did all that

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work was amazing. It was a clear example of how to motivate the experience and expertise of the House, and how noble Lords become enthused about something to the benefit of the country and of the Government. When they read the committee’s report and the report of this debate in



they will realise that there is great support for what they are doing to try to get the railways to work properly so that we can go for growth while keeping the focus on the consumer.

I know that the Minister will write to noble Lords, and probably I shall have to as well to ask for additional information on some points, because this has been a fascinating debate. I will mention also the noble Lord, Lord Brooke, who has a great ability to keep us on the rails and heading in the right direction. He does that at every meeting. I thank him for it and am so glad that he is still on the committee.

The noble Lord, Lord Davies of Oldham, paid us a gracious compliment by referring to the telling contribution of the members of the committee, and to the significant points made by non-members. His one objection was to the title of the report. We debated that. Certain of us—I will not say who—thought “Light at the End of the Tunnel” would be better. Others said perhaps not. I am sure that the noble Lord, Lord Roper, would agree that there has been quite a lot of discussion about the titles of reports. Perhaps one does all the hard work and then comes to a point where one can introduce a bit of levity. However, I do not think that our title is too cheeky; I think that tunnel vision is something we have experienced and will have to address.

I thank the noble Lord, Lord Haskel, for the depth of his knowledge. He is so precise, which was obvious today in his contribution.

I am sure I have missed out someone; I have just been scribbling. No, I do not think I have.

I thank the Minister, who had a very difficult job to do. He knows where we are coming from and we know where he is coming from and that he supports us. We have got to try to get matters moving. It would be in order to have further discussions about the treaty of Canterbury but, in the mean time, I thank all noble Lords.

Motion agreed.

House adjourned at 6.55 pm.