Clearly, I am not saying that the Highways Agency should be responsible for anything more than the physical safety of the structure of the road and the safety provisions on the management of that road, whether that is signage, markings, telemetrics, or whatever, which contribute to safety. The agency is responsible for that; all the rest of it—vehicle design, driver behaviour, and so on—is the Secretary of State’s responsibility. However, there are areas where the builder and operator of the road must be responsible. As regards our strategies on road safety, that has been underemphasised hitherto. It is an important thing. In certain other countries, including some of the countries to which the Minister made reference as models—Denmark, Holland and Sweden—it is much clearer that they are building safety requirements in the slightly arms-length companies they have.

We will definitely return to this issue. I hope that the Minister and her officials retire and find some way of reflecting this discussion in the Bill before we come to Report. If not, I can promise the Committee that I will return to it. In the mean time, however, I beg leave to withdraw the amendment.

Amendment 18 withdrawn.

Amendment 19 not moved.

5.30 pm

Lord Davies of Oldham: My Lords, Amendments 20 and 21 in my name are designed to encourage proper scrutiny of the road investment strategy that will be set

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by the Government. The impact assessment makes clear the potential effect of the operation of the new organisation on the public:

“Corporatising the HA will provide it with a greater commercial focus, but there is a risk that it might take decisions that have negative consequences for the public. We would not expect a company at arm’s length to make identical decisions to a minister, who is expected to take into account a wider range of impacts and views and is then held democratically accountable for them”.

Exactly. That is why it is enormously important that this body, which is to be established with increased powers, is made fully accountable.

The road investment strategy is likely to last five years and will involve the spending of a huge amount of public money. As the Minister said at Second Reading, the Government committed more than £24 billion to upgrade Britain’s strategic road network between 2011 and 2021. The strategic road network, as the Committee knows, carries a third of all car and van traffic and 65% of heavy goods traffic. It is therefore vital that business, trade bodies and campaigning organisations can make their views known during the consultation process. It is also vital that the public can make their views known, both directly through the consultation and indirectly through their elected representatives. If it is a vital part of the Government’s plans to secure stability and enable long-term planning, then it is also essential that this process is transparent, open and accountable. Otherwise, it will never gain the public confidence that it needs to operate successfully. I beg to move.

Lord Whitty: My Lords, I have an amendment in this group. I agree entirely with my noble friend Lord Davies on how we get to the investment strategy. My amendment is at the end of this group, and it is about Parliament’s oversight of the process. We always ought to consider how Parliament both approves and monitors bodies and documents which are referred to in legislation.

I am proposing that, before the first strategy is implemented, it should be subject to a report of a Joint Committee of both Houses. I suspect that our colleagues in the House of Commons will say that it should be a DfT Select Committee. Nevertheless, some form of parliamentary accountability is necessary. It is nowhere in the Bill, and it should be. It should be a regular process; I am saying every five years because that is the period to which the money and strategy initially relate. Certainly, a regular review of the roads investment strategy ought to be built in at parliamentary level. That will complement the consultations that are required at the beginning of the process in my noble friend Lord Davies’s amendments.

Lord Berkeley: My Lords, I have two amendments in this group. Amendment 26 is more about who should be consulted. I expect the Minister will say that she does not like lists and therefore we should not have them, but as my two noble friends have said, it is very important that the Secretary of State should consult organisations that are affected, including,

“Network Rail … local transport authorities … combined authorities … statutory environmental bodies”,

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and anyone else that the Secretary of State thinks is important. It is very important that this should happen. If it is going to happen, that is fine, but it is very important that it does.

With regard to Amendment 31, on Part 2 of Schedule 2—“Varying a road investment strategy”—it seems more appropriate to make use of the Planning Act 2008 provisions and apply them to the road investment strategy as if it was a national policy statement. My amendment would bring it all together in a national policy statement structure rather than the one in the Bill. I do not think I need to explain it any further. I look forward to the Minister’s comments.

Baroness Kramer: My Lords, as we explained in the RIS explanatory document, Setting the Road Investment Strategy—another one of this cluster of documents that I hope people have found but if they have not, the Library has them—a key mechanism for public and stakeholder engagement in the development of future versions of the road investment strategy will be the route strategies. That is the point at which local authorities and all kinds of interested parties can look at the specifics and contribute greatly to the process. The outputs of the route strategies will be used to develop a strategic route network initial report, which will inform the Government’s proposals. One of those complex documents—I think that it is the one that the noble Lord, Lord Jenkin of Roding, was holding—provides a graphic pattern for how those pieces can work.

Of course, the Government will engage with key stakeholders when developing our proposals, but that is different from requiring a formal consultation. Obviously, it is the goal of the Government to ensure that we come forward with a very well informed document, and that engagement is inherently part of that process. Where we have looked at providing for consultation in this document is in relation to varying the RIS. The point that we have made is that where a strategy is being varied, because it has the downside of potentially weakening the value of the strategy as a long-term funding settlement, that is the part of the process where we want to bring in consultation in a more formal sense.

We would have no certainty that those variations would have had the stakeholder engagement that is required for building the route strategies in the first place, which, as I say, are the first step in the flow-through of information that informs and helps to structure the RIS itself. That is why we have a distinction from allowing the normal pattern of extensive stakeholder engagement when forming the RIS because it will have had that input through consultation on the route strategies. So we have the route strategies leading to the RIS. If the RIS is varied, that process will not have taken place so it is for variance of the RIS itself that we require consultation.

Lord Berkeley: The first strategy is put before Parliament but presumably the Secretary of State consults all the relevant people before he does that, or is he just going to put it before Parliament without consultation? That is the impression I am getting from the Minister.

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Baroness Kramer: The Secretary of State and others are very heavily engaged with stakeholders. That is the way in which they expect to develop the RIS. The first one is always a bit odd because if you look at the rules, they require a to and fro between the Secretary of State and the strategic highways company, and of course the strategic highways company does not exist yet so there is a fairly unique arrangement for the first RIS, which we expect to be published—I cannot give dates—in the future.

Lord Berkeley: I will press the Minister once more. I see nothing in part 1 of Schedule 2 that says that the Secretary of State should consult anyone else apart from the strategic highways company. Maybe I have got it wrong but that does seem a bit odd.

Baroness Kramer: The point that underpins all this is that Ministers, rather than Parliament, have traditionally made decisions on infrastructure funding, and we are not seeking to overturn that. It would be rather unprecedented for the Government to put forward a funding and investment plan for debate. If that were to become the underlying principle, it would have a sweeping impact on many different aspects of government, so we are not proposing that. We also, frankly, recognise that it would slow down what is already not a brief process. We want to get to the point of getting infrastructure out into the ground.

For example, the rail investment strategy can be issued by the Government without being laid before the House and debated. That does not prevent Parliament from holding the Government and the rail sector to account, and that is the model that we are following here. We are behaving consistently with how these issues are already handled in government—we are not overturning that, other than to the extent of putting in a requirement for consultation should there be a variance in the RIS. As I said, that is because it has that sort of exception, or potential downside, of undermining the framework of long-term funding certainty that we are trying to create. I assure noble Lords that there will be extensive stakeholder engagement around the RIS. Indeed, the RIS will typically be built from the route strategies up, and there is extensive consultation at the route-strategy level. There is a place for consultation in all this, and the arrangements as a whole are very satisfactory for that purpose.

One of the amendments in the name of the noble Lord, Lord Berkeley, lists a number of stakeholders that would have to be consulted during the preparation of the RIS. He is right about lists tending to be a problem for me. The practical reality is that the stakeholders know who they are and the Government know who the stakeholders are. There is constant engagement, and it is a fairly fluid group, so there would be no great advantage to including a list of them.

I want to make sure that I cover the full range of issues. The noble Lord, Lord Whitty, suggested that Parliament should report on this. He said that he was not sure his amendment achieved what he intended, but we read it as requiring that Parliament approve each proposal in Part 1 of the Bill before it could come

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into force, and that Part 1 must be reviewed every five years. We are debating the Bill now, and I am sure his specific intent was not to require it to be reviewed as soon as it was enacted. We may just have some confusion around that issue. Perhaps he was trying to suggest that the RIS should be reviewed by Parliament—that is my understanding from the comments that he made.

Lord Whitty: Just for clarification, when I wrote the amendment I meant Part 1, but I am afraid that I spoke as if I meant the strategy. I am happy not to pursue the issue at this point.

Baroness Kramer: I appreciate the noble Lord’s comments. We feel that there is a substantial mechanism for engagement in this process. I take on board the concerns that have been expressed today but I think that we have probably got it about right. On that basis, we ask that the noble Lord considers withdrawing his amendment.

5.45 pm

Lord Davies of Oldham: My Lords, it is my duty to withdraw my amendment. However, the Minister seems to suggest that the Government should not consult when they are launching a body which they favour and expect to be successful, but should consult like fury the moment it has gone badly wrong. In my experience, Governments do things the other way around, but perhaps the Minister is setting up a new model on how consultation will be carried out. Nevertheless, I beg leave to withdraw the amendment.

Amendment 20 withdrawn.

Amendments 21 to 24 not moved.

Clause 3 agreed.

Schedule 2: Road Investment Strategy: procedure

Lord Davies of Oldham: My Lords, there currently appears to be a gap in the Government’s draft licence for the strategic highways company. It says:

“Provisions relating to commercial activity and charging for services are still under consideration. We expect that the Licence holder will, where legislation allows, be able to continue to undertake commercial services or charge for services, on a non-discriminatory and cost-recovery basis, where this represents the continuation of current practice by the Secretary of State, in his role as highway authority for the network”.

My amendment is intended to probe this position and to ascertain in what precise circumstances the Government envisage the strategic highways company charging for services. There is some concern in many quarters that

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the model that is being constructed allows for the strategic highways company or companies to charge for road use. Although the company will have to be wholly owned, Clause 8 includes extensive powers for the strategic highways company to delegate functions, which could mean that many roads are contracted out in the future.

Our history on charging schemes for roads is not a particularly happy one. The toll road on the M6 was supposed to take 75,000 cars a day; in fact, it averages just over 40,000. As the embattled public who travel on it will testify, the equivalent stretch of the old M6 takes up to 180,000 vehicles a day. Therefore, road pricing and toll roads raise very real issues. There are also concerns that if the Government significantly increase the number of roads for which people have to pay, there will be increased congestion on other roads and more accidents as a result. The M6 toll road stands as a bleak beacon of warning. I beg to move.

Viscount Hanworth (Lab): My Lords, in lending my support to my noble friend Lord Davies, I speak to my Amendment 39. It proposes that:

“The power to set a toll or a tariff on a strategic highway may not be delegated to any company or person but must remain the sole prerogative of the Secretary of State”.

We have heard from the Minister that there are no immediate plans for privatising the highways company, which is set to replace the Highways Agency. However, this does not allay our anxieties about the privatisation of our strategic highways network. Nothing that the Government have said will preclude them from asking private contractors to administer parts of the network under concessions. The contractors would derive their income from tolls.

We need only look across the Channel to see an example of a strategic highways network that is largely under the control of private profit-making agencies. The example is provided by France, where 45% of the motorway network is now operated under commercial concessions, including all the main arteries. This circumstance has been the result of a major sale to private investors of the state’s holdings in autoroute companies, which began in 2005, under the Villepin Government, during the presidency of Jacques Chirac. Initially, the tolls on the roads were set by the French Government, but the private companies have been permitted to make year-on-year increases in the tolls. There is now widespread discontent at their exorbitance and at the excessive profits of the companies, which acquired their assets at knock-down prices. Clearly, the French Government ought to have retained the sole prerogative to set the levels of the tolls.

The only example of a tolled motor road in the UK is the M6 toll road of a mere 27 miles in length, which bypasses the Birmingham conurbation. This is controlled by the Australian company Macquarie, which holds the concession until 2054. In contrast to the French toll roads, this under-used road appears to be a commercial failure. In 2012, the operator, Midland Expressway, claimed to have made a loss of £41 million. I have no way of confirming this figure, which seems to have been exaggerated; there would have been a tax advantage in exaggerating the loss. The recourse of the company was to increase the tolls. This may have increased the

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company’s revenue, but it would certainly have diminished the traffic on the road, thereby reducing its social utility and increasing the costs of congestion and physical depreciation that are borne by the adjacent M6 freeway.

These circumstances should serve to emphasise a fundamental principle. Road charges need to be set by a central authority with an overarching concern to maximise the utility of the roads. High tariffs should be levied to deter vehicles from travelling on congested roads. High tariffs that deter traffic from using empty roads should be lowered or abolished. It might seem to be redundant to declare such principles at a time when there appear to be no immediate plans to impose additional tolls and tariffs on our roads. However, I believe that such charges are certain to be imposed sooner rather than later.

There are two factors here. The first is the likelihood that this Government, or a future Government, will desire to raise revenue to finance additional construction and maintenance. The second is the availability of new and effective technology that will greatly facilitate road-charging. My concern is that, unless the Government think ahead and resolve to take a strategic oversight of the matter, a piecemeal and dysfunctional system of road-charging will arise that will reproduce the problems that can be clearly discerned in other countries that have already applied tolls and tariffs to their roads.

Finally, whenever private enterprise is charged with undertaking motorway projects, it has been expected to raise the finance for those purposes from the open market. That has certainly been the case for the French toll roads, and it has been the case with our only toll road company, which administers the M6 toll. By going in their own right to the market, the companies have been denied the advantage of the superior creditworthiness of the Government. In consequence, they have had to bear much higher interest rate charges. There should surely be a way of conferring the benefits of the Government’s creditworthiness on all borrowings in favour of investment in social infrastructure, whoever undertakes them.

Lord Bradshaw: I shall add some comments to those just made by the noble Viscount, Lord Hanworth. The Government have a very major problem stalking up on them—namely, the lack of tax revenue that they will get from motoring. People are buying cars that are free of revenue tax and of fuel tax—or rather they pay very much less. Therefore, the flow of revenue that the Government are expecting to receive from fuel duty or vehicle excise duty is going to decline quite rapidly.

We are talking about the future of the highways network and we will have to find some other means of financing it. We are talking about the long term, but people are quick to pick up on ways of avoiding tax legitimately. I therefore believe, despite what the noble Viscount, Lord Hanworth, said, that the technology is available to charge people to use roads. How you do it and who sets the toll will be matters for future consideration, and what the noble Viscount said about this is important.

You also have the problem of people diverting away from the tolled road on to secondary or non-Highways Agency roads. Again, the technology exists to prevent

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most of this, and modern logistics companies cannot afford to send lorries around circuitous routes because drivers’ hours regulations, if properly enforced, mean that most of them programme their drivers to get the maximum out of the 10 and a half hours for which they are allowed to drive. If these people take more circuitous routes to avoid paying tolls, they will therefore bust the drivers’ hours regulations in almost every case.

I am going to speak about this later, but there are a number of strategic issues—one of which is how we pay for the use of roads—which have to be faced, not by the immediate Government who have brought this legislation forward but by successive Governments of whatever colour. They will have to find a method of financing a road network with declining revenues from the present system of taxation.

Lord Whitty: My Lords, I have slipped an amendment into this group as well. In a sense, it deals with the same problem—the ability of the new company to raise money on the markets—from the other end.

The reality is that the Treasury will never provide quite enough money out of general taxation to build roads. My noble friend Lord Hanworth and the noble Lord, Lord Bradshaw, have focused on road charging as one way of getting that income. Who would be accountable for that? The Government have said that they do not currently intend for there to be any road charging. Strategically, in the long-term, they may have to revisit that. It is therefore quite important that if, down the line, they do so, the Secretary of State would be able to limit or control the charges which could be raised on those roads; I believe that was the primary purpose of my noble friend Lord Hanworth’s amendment. The French example, with which I am familiar, shows the dangers of not doing so.

That could be done by a Government-owned company as much as it could be done by the private sector, although the temptation may be a bit different. Either way, if the company cannot raise money through charging and it cannot raise money by going to the market to borrow, the pressure on allocation for the strategic investment programme and the Treasury will be acute down the line.

As I have said before, when this proposition was made I thought that one of its advantages might be that the company could raise its own money against future income of one sort or another—capital gains and so forth. Apparently, that is not to be the case. That is a severe limitation on the flexibility of the company and the degree to which it is genuinely independent. Clearly, its access may ultimately be controlled by the Secretary of State. The amendment recognises that, in that it is about the Secretary of State setting the terms on which the company could go to the market. That could include going for public loans or literally going to the market—issuing bonds and getting a return on them, which is, of course, how we built the railways. If you do not have that flexibility, the arguments down the line about how much this year and next year is in the Treasury’s gift and the question of what alternatives need to be considered will always be there, however firmly you might have set the strategy and the expenditure

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attached to that strategy at the beginning. This would give some flexibility, with a bit of control by the Secretary of State.

6 pm

I know that there is a Treasury doctrine about this all being set against the public sector borrowing requirement or the central government requirement, or whatever. It is the same problem that we have with local authorities not having the ability to raise money for housing. It is also a definition used in relation to local authorities in this country, which is much tighter than the definition used by most comparable companies, whereby local authorities can raise money against their assets, or future assets, free of it being charged against the central government borrowing requirement. It is a complete obsession of the Treasury that that is not the situation here; in other respects it adopts it, as most other OECD countries do, but not in this respect. That applies to local government.

In some ways, the highways company will be treated as if it were local government, because it is a traffic authority as well as a highways authority, just as local government is. Therefore, the issue of how we control local government raising capital applies equally to the new highways company. It may be resolvable only in that wider context. I see no sign, I have to admit, that the Treasury team of the current Opposition is likely to change those long-standing laws, despite my remonstrations with them over the years. But at some point, the logic of having powerful local authorities and powerful independent state-owned companies that are able to raise their own money will dawn even in Great George Street.

Lord Bradshaw: I shall build on what the noble Lord, Lord Whitty, has just said. Earlier in the week, noble Lords may have seen a ComRes poll in the Independent newspaper about payment for the National Health Service. The poll suggested that people are prepared to pay more money; it was quite a sizable proportion—51% to 43%, I think. But the condition that they put was that they want the money spent on the health service—and the same applies to highways. It brings up this very old problem about hypothecation, which has to be faced if the health service and the highways system is not to fall into disrepair.

Lord McFall of Alcluith (Lab): My Lords, I support the noble Lord, Lord Whitty, in what he says. The Treasury has been rigid in its application, but there was a great initiative on innovation by the Chancellor in the last Budget, whereby he put £130 billion behind the Help to Buy scheme, which some would call the “help to vote” scheme. That was the Treasury showing real initiative. If the Chancellor can do it for the housing market and show flexibility there, why can we not do it for infrastructure at a time when borrowing is at its lowest ever? If we cannot do it now, we will never be able to do it.

Baroness Kramer: My Lords, I have to be quite quick to be sure that I finish before rising time, so these will be somewhat abbreviated responses. A strange

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hare may have been started running by some of the language used here. The commercial activities that the SHC engages with, such as selling salt supplies to the local authorities, is all piddly ante stuff, to be taken care of in the governance documents rather than the RIS, which I think is the relevant place for it.

As for funding road infrastructure, the power to retain decision-making over tolls or tariffs for the Secretary of State, under the amendment to Clause 6, is just not necessary, because all the powers to make decisions over tolls or road usage remain with the Secretary of State, who is not minded to enter into road pricing—although that may distress some noble Lords who have spoken here tonight.

It would be possible for the Secretary of State to permit this body to raise its own financing, but he would have to give that permission. Given the way in which the Government work, there would have to be Treasury support for that. This Government certainly are not minded to do it because, as the noble Lord, Lord Whitty, said, borrowings would go into the public sector borrowing requirement. Therefore, to pay higher pricing for financing that could be obtained by the Government themselves borrowing directly is not something that this Government are minded to do for their road infrastructure. This project commits long-term funding, which will come overwhelmingly from the Government. An exception might be possible if there were a discrete road project, which might be PFIed, although nothing in that range is being contemplated at the moment.

Looking at all those issues, while it may disappoint Members that we are not engaging in plans for road pricing or extensive borrowing by the HCA in the public markets, I still ask the noble Lords to withdraw their amendments and understand that this is really a policy issue and that the Government have made appropriate decisions in determining these issues.

Lord Davies of Oldham: My Lords, this was a probing amendment and it certainly hit its target. Let us be conscious, certainly on my side of the Committee, that this Bill is known as a Lords starter. We therefore have no guidelines from the democratic House as to whether road pricing would ever appear on the agenda; it certainly does not appear on the agenda of my party. I take at full value the points that the Minister has made today on behalf of the Government and I beg leave to withdraw the amendment.

Amendment 25 withdrawn.

Amendments 26 to 31 not moved.

Schedule 2 agreed.

Lord Ahmad of Wimbledon (Con): My Lords, I think this might be a convenient moment for the Committee to adjourn.

Committee adjourned at 6.07 pm.