Railways Bill

Public Bill Committee, 16 December 2004.

Standing Committee A

Railways Bill

Win Griffiths (Labour, Bridgend)

I call the Minister to move the motion to amend the Committee's order of Tuesday 14 December. Copies of the motion are available in the Room.

Tony McNulty (Labour, Harrow East)

I beg to move,

That the Order of the Committee of 14th December be amended by the substitution of the following for paragraph (l)(b)—

''(b) at 9.25 am on Thursday 16 December; and

(c) at 9.25 am and 2.30 pm on Tuesday 11th January, Thursday 13th January and Tuesday 18th January;''

This is an historic occasion: it is the first time that this provision has been invoked since it was duly modernised. By agreement and to assist the Liberal Democrats with their difficulties this afternoon, I have, with due humility given the historic occasion, moved an amendment to the Programming Sub-Committee resolution in order to delete this afternoon's sitting.

Win Griffiths (Labour, Bridgend)

The question is that the Committee's order of Tuesday 14 December be amended as set out in accordance with the provisions of Standing Order 83B(10).

Greg Knight (Conservative, East Yorkshire)

I am delighted that at least in one respect the Minister will be in the history books. Unusually, perhaps, for such a motion, we have no objection to its terms. We do not disagree with the Bill in toto, and although the time available to us to consider what is left to be considered in Committee is barely adequate, it is adequate. For those reasons and to assist one of the minority parties, we shall not seek to divide the Committee on the motion.

John Pugh (Liberal Democrat, Southport)

May I express my undoubted gratitude to other members of the Committee, to the Minister in particular and to the official Opposition on this historic occasion? The motion will save me from having to be in two places at one time this afternoon, because I shall be dealing with the School Transport Bill, as people will be able to verify by looking at the annunciators from time to time. The motion will save me from the burden of having to try for bilocation. I think that bilocation used to be considered one criterion by which people were canonised.

David Wilshire (Conservative, Spelthorne)

I am surprised that the Liberals cannot be in two places at once. They have can two policies on the same subject at once, so why can they not be in two places? In relation to the usual channels, if I heard the Minister correctly, he now claims to be new, new Labour. We claim to be new Conservatives and this is a new Committee doing something for the first time. It is rare for me to be in the advance guard of radical change—[Interruption.] I am glad that my opposite number agrees. I am sure that the Committee will understand that the only thing that I want to place on the record is that although I support what is happening and I was involved in the negotiations, that does not mean that we agree that we need less time or that we approve of the programme motions. We are simply trying, willingly and in the spirit of Christmas, to help a party that cannot sort out its own arrangements.

Question put and agreed to.

Clause 3 - General duties under s. 4 of the 1993 Act

Win Griffiths (Labour, Bridgend)

I believe that the debate had been concluded.

John Pugh (Liberal Democrat, Southport)

My hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) has given me authority to seek leave to withdraw the amendment.

Win Griffiths (Labour, Bridgend)

Unfortunately, that cannot be done. That is why I must put the question to the Committee.

Question put and negatived.

John Pugh (Liberal Democrat, Southport)

I beg to move amendment No. 3, in page 3, line 34, at end insert

'(7A) After subsection (4) insert—

''(4A) The Secretary of State shall also be under a duty, in exercising the functions assigned or transferred to him under or by virtue of this Part, to continue to operate any franchises currently under the management of the SRA.''.'.

We are essentially talking about the South East Trains franchise, which, when it was in private hands, was a disaster. The franchise was subsequently taken back by the Strategic Rail Authority, which has been running it. There has been an improved quality of service for passengers, who seem very happy with the current arrangements. The franchise is in effect being run in the public sector. People need to recognise that and the fact that a franchise can be run well in that way. It has been interesting to compare its performance with that of the private sector and use it as a comparator. We have argued, and continue to do so, that given the success of the venture, it is appropriate to maintain the arrangement or to put measures in place that allow the Government to maintain the arrangement in the medium term. That would give us a comparator with the private sector and so inform debate on whether the railways can be run adequately as a public service.

Without the amendment, nothing will require the Secretary of State to continue the arrangement, which we believe would be a good idea, as it is clearly working to the advantage of the public. As evidence of that, the Select Committee's conclusion states:

''We were surprised at the evident unwillingness and timidity of the Government and the SRA to contemplate the SRA running train services directly, even if the SRA's experience of managing South East Trains demonstrated clearly that this could be done by the SRA at the best price and highest efficiency.''

The Committee then says what I say:

''It seems common sense that where benchmarking identifies the most cost effective solution to running a franchise . . . that solution should be adopted. The public are rightly concerned with excellent service and value for money. The record of the private sector . . . overall is poor. To adhere to the policy of restricting such operations on ideological grounds''—

although I would not accuse new Labour of being ideological—

''does not appear sensible. In fairness, this evidence was given before the Government's recent announcement of its rail review.''

With the Select Committee and the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) behind me, I do not see how the Government can refuse the amendment; that must surely guarantee a sympathetic response.

Tony McNulty (Labour, Harrow East)

As the hon. Gentleman says, SET services are currently run by the SRA in lieu of taking the franchise away from Connex. That was taken away, it should be said in passing, because of financial mismanagement and a lack of confidence in the franchise's financial future and not because of anything that Connex had done in running the service, although I know that the change was greeted warmly by commuters and other passengers.

In future, there will be no SET franchise to preserve in the public sector. It was made clear some time ago that we were in the process of redrawing the franchise map for the entire country. We are well along the process for the integrated Kent franchise, of which the SET franchise will form a part, to the extent where four bidders have already been shortlisted. An initial invitation to tender has been issued, and a final invitation will be made shortly. Even if I had been persuaded by the eloquence of the hon. Member for Southport (Dr. Pugh) to preserve SET as a public sector comparator, we are too far along the broader process in integrating the assorted Kent franchises—

David Wilshire (Conservative, Spelthorne)

Too far down the tracks.

Tony McNulty (Labour, Harrow East)

Yes, we are too far down the tracks—I thank the hon. Gentleman—to reverse the process now.

We are doing that for entirely pragmatic reasons. By the by, there has been significant improvement in all three southern franchises. This month's figures are only just out today, but I cheerfully admit that last month SET's improvement was better than southern and south-west's by 0.2 per cent. We have to say that the SET improvement has been marginally better, and I congratulate the SRA management team that has gone in to run it post-Connex. However, it is wrong to suggest—not that the hon. Member for Southport did, but others have—that there has been a miraculous transformation of SET compared with South West and Southern all because of some magic pixie dust from the public sector. That is not the case. The SRA management team has done well to match and be slightly ahead of the overall improvements in the three southern franchises, much of which is down to Network Rail, to its credit, sorting out some of the infrastructure problems across London and the south-east.

The remapping process is important to us and central to much of what we do. It is down to whoever wins the new integrated Kent franchise to take things forward in Kent. It is right to retain private sector expertise in delivering the IKF's service. Running the franchise as a partnership between public and private sectors will benefit passengers and build on improvements, and we will introduce strong incentives to improve reliability and quality.

The points made about a public service comparator are not entirely well grounded, but we are well down the tracks, as the hon. Gentleman said, in the new franchising process for IKF. I shudder to think what it would cost to unpick that process now that we are so far down the line. Overall, the template that we are using, with all the restructuring included in the Bill, is the right way forward for our railways, and I urge colleagues to resist the amendment.

John Pugh (Liberal Democrat, Southport)

I have to accept that, whether or not we think a public sector comparator is desirable, we will not get one in this case because contractual arrangements have progressed so far. I must accept that as a fait accompli. However, I have two residual questions. The Minister has not said whether there is merit in having a public sector comparator. For example, if a subsequent line performs so disastrously that similar action must be taken, how will that situation be resolved? Secondly, in relation to timing, will there be an awkward interim period when the SRA has finished but contractual arrangements have not been firmly put in place? I have not researched that, but if the Minister can assure me, I will seek leave to withdraw the amendment.

Tony McNulty (Labour, Harrow East)

Let me try to tackle all those questions. Given the nature and complexities of each franchise, I fail to see any merit in having a public service comparator against which everything can be measured, which is the only value of having one. Dwelling on the example of the IKF, how is it useful to pull out one element of the IKF to represent the rest of Kent as a public service comparator with whoever wins the east coast or west coast main line franchises? The franchises are entirely different, so I am not convinced about the need for a public service comparator.

On the hon. Gentleman's point about timing, we have said that nothing in the Bill will be retrospective. We will not revisit franchises that have already been let. Franchise remapping and other elements of the Bill are part of a rolling transition, as they must be. In no way is there a little switch to flick, either in terms of the demise of the SRA or any other element.

John Pugh (Liberal Democrat, Southport)

So the Minister does not expect a situation in which the SRA has a small half life and is running a franchise despite all its other functions having gone.

Tony McNulty (Labour, Harrow East)

I repeat, because I like saying it, that I am not lawyer, which I am very happy about. I am also not a futurologist. If between now and the final demise of the SRA a Connex-type situation arises in which the SRA has to step in and use its powers temporarily to run a failing franchise, when we reach the ultimate legal demise of the SRA the power to run that particular franchise may transfer temporarily to the Secretary of State pro tem until the situation is resolved. That may be the case, but I suspect not. I do not have a failing franchise in mind between now and the ultimate demise of the SRA, but there must be a backstop. Currently, the backstop is that the SRA will step in and temporarily run a failing franchise pro tem. Unless I am told otherwise, in the case of the demise of the SRA I think that a similar power will be transferred to the Secretary of State, although I cannot recall the exact clause of the Bill covering that. There must be that contingency.

John Pugh (Liberal Democrat, Southport)

With that assurance, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

George Howarth (Labour, Knowsley North and Sefton East)

I beg to move amendment No. 56, in clause 3, page 4, line 12, at end insert—

' ''(cc) to have regard to the funds available to the Passenger Transport Executive for a passenger transport area in England for the purposes of its functions in relation to railways and railway services in that area.''.'.

May I belatedly welcome you to the Chair, Mr. Griffiths? I know from many years of experience of how you administer things that you will treat us all fairly, perhaps too fairly on occasions.

Clause 3 deals with the general duties under section 4 of the Railways Act 1993. My amendment would give equal status to passenger transport executives in England to that which is prescribed for Wales. I know that that is close to your heart, Mr. Griffiths.

My reason for tabling this probing amendment harks back to a point I made on Second Reading. It relates specifically to Merseytravel, the the passenger transport executive for my constituency which also covers the constituency of the hon. Member for Southport (Dr. Pugh). The Committee may not be aware that Merseytravel has taken over control, through Mersey Electric, of the network for Merseyside. It is doing a very good job. I gave the statistics on Second Reading and will not repeat them. It is involved in a concept known as vertical integration. For aficionados of the technical language of transport, I am reliably informed that that means full local decision making. My hon. Friend the Minister will no doubt correct me if I am wrong.

Merseytravel enjoys a special status because it has control of the local rail network. Indeed, it has huge ambitions to do even greater things, not least of which is a plan to extend the electrification to Headbolt lane in my constituency. I realise that Headbolt lane will not be familiar to anyone else in the Committee. It is a fairly isolated part of Kirkby, which is not well connected by transport links to anywhere else. Electrification would make an enormous difference to an area that has had a long history of deprivation.

I am worried about the possible effects of the Bill on Merseytravel's ambitious plans. I like to think that it will shortly be able to compete for the west coast main line because no one could do a worse job than Virgin, but I am straying slightly from the point. Pretty well everyone acknowledges that it is doing a good job, with the possible exception of the hon. Member for Southport, who complained that he was once delayed on a train from Liverpool to Southport. I suspect that there is a whole Focus leaflet devoted to that experience. I have a high regard for him, as he knows, but like most Liberal Democrats he has built a career on complaining. No doubt today will be a further occasion for him to complain.

I conclude by repeating something that I said on Second Reading. The chief executive and general secretary of Merseytravel, Mr. Neil Scales and the chair, Councillor Mark Dowd, are doing a good job. They have huge ambitions to do an even better job. I want to ensure that the Bill does nothing to inhibit those ambitions. Therefore, the amendment seeks to discover how my hon. Friend the Minister intends to give even greater support to Merseytravel in future.

Mark Field (Conservative, Cities of London and Westminster)

Much as I would not deny the importance of Merseytravel to folk in Liverpool and beyond, it is curious that the clause makes no reference to the importance of a strategic rail policy for England although it mentions the roles of both the Scottish Parliament and the Welsh Assembly. If such strategies were considered to be so important when the Strategic Rail Authority was set up in 2000, why is there no reference to England?

Obviously we will discuss under clauses 15 to 17 the strategies for London that are in the hands of Transport for London. However, it seems curious that there is no reference to the importance of similar strategies for the rest of undevolved England—I suspect that it is likely to remain undevolved after the referendum result of 4 November—particularly in view of the fanfare that accompanied the 10-year plan in 1999 and, the following year, the creation of the SRA. Why has England been excluded?

The hon. Member for Knowsley, South—or is it Sefton and Knowsley? Somewhere in that neck of the woods, anyway. Apologies to the folk of Kirkby. [Interruption.] And we have problems with Scottish constituencies. I have no excuse, however, because it is 200 miles from Hadrian's wall.

The points was made that Merseytravel does a great job in the Liverpool and Wirral area, and I suspect that other local travel organisations south of Hadrian's wall will be surprised that no reference is made to their strategic work. I hope that the Minister will either explain why England is excluded or tell us that it is appropriate that the amendment be agreed, so that the Bill will refer to English matters.

John Pugh (Liberal Democrat, Southport)

May I clear up one thing straight away? I have been unfairly criticised by the hon. Member for Knowsley, North and Sefton, East (Mr. Howarth) for maligning Neil Scales and the executive of Merseytravel. Nothing could be further from my mind. I made an incidental remark about a particular event on a particular day.

George Howarth (Labour, Knowsley North and Sefton East)

Apology accepted.

John Pugh (Liberal Democrat, Southport)

The service used to be known as ''Miseryrail'', and it has improved significantly under the Serco franchise. We all recognise that, even if, occasionally, one or two trains do not get to their destinations on time. That was the experience that I endured one day, shortly after speaking in an ante-room of this House with the chief executive, who said what an extraordinarily good service it was. It was ironic that the very next time that I used it, it was not perfect. It is, none the less, a fairly good service.

The hon. Gentleman is trying to add to a trio of paragraphs that require the Office of the Rail Regulation, in making decisions, to pay regard to the funds available to the Secretary of State and to the National Assembly for Wales, but which do not mention the passenger transport authority. In several places where one might expect them to be mentioned, passenger transport authorities are omitted. That is of some concern because, as the hon. Gentleman said, passenger transport authorities will play an increasing role in the delivery of the railway service. If decisions are made by a regulatory body without regard to those circumstances, life will not get any easier and the transport service will not be delivered any better.

The Select Committee has been very critical of the rail regulator, now succeeded by the Office of Rail Regulation, and his tendency to allocate funds in circumstances in which that might not be prudent or in line with strategic objectives. Rather negatively, it referred to him at one stage as the rail tsar, and said that the sums of money allocated by him are so large and the issues of transport infrastructure of the country so important that the Government need to take back from him decisions about the level of infrastructure funding. The Government have not gone that far. What is being pleaded for is sensitivity to the funding situation of the key bodies concerned, whatever decisions are made. The Merseyside passenger transport authority is, I repeat, doing a good job of delivering a rail service. It should not be hampered by people who are unaware of the financial circumstances under which it labours.

To that extent, the hon. Member for Knowsley, North and Sefton, East has proposed a fair amendment. However, I understand that if it is accepted, consequential amendments will be required because more or less the same formula is used elsewhere. When a request is made to consider or pass information to several bodies, the passenger transport executive is usually not mentioned.

Tony McNulty (Labour, Harrow East)

I know that I forget things myself, but it is a tad discourteous to forget the names of hon. Members' constituencies. My hon. Friend the Member for Knowsley, North and Sefton, East made a fair point. [Interruption.] Yes, I do have the list of Committee members to remind me of his constituency. It confuses me somewhat in that the hon. Member for Cities of London and Westminster (Mr. Field) is the MP for where we sit. I sometimes feel that I should write him a letter to seek permission to come to his constituency every time I come to work, but happily we do not have to do that.

I am grateful to my hon. Friend the Member for Knowsley, North and Sefton, East for raising the issue, and he makes an entirely fair point, but I shall deal momentarily with the point made by the hon. Member for Cities of London and Westminster. Given that the Secretary of State now has clear powers in relation to a range of rail services—principally, but not exclusively, the national network, which is not party to specific areas—and given that we cover Wales, Scotland and the passenger transport executives, I fail to see what an English rail authority would do that is not covered by those elements. Perhaps the hon. Gentleman will elaborate on his ideas, but his proposal is a tad confusing.

I am grateful to my hon. Friend for explaining what the amendment addresses—namely, that the ORR should have regard to funds available to passenger transport executives for rail in exercising its functions under the 1993 Act and the Bill. It is important that the ORR should have regard to the interests of other public sector bodies that fund the railways.

I absolutely endorse, as I have done previously, my hon. Friend's comments about Dowd and Scales's regime—I was looking for a nice word—at Merseytravel. They have been extremely innovative and what they have done is, in some degree, a template for what other passenger transport executives might do within the curtilage of existing laws, let alone future laws. Although Neil Scales looks nothing John F. Kennedy, in a Kennedyesque fashion, they start from the premise of how they can break through impediments to securing achievements in the interests of public transport in Merseyside. That approach is different from the one that I fear is the starting point in some passenger transport executives, which ask, ''What are the barriers and how can we whinge and moan about them?'' That is not talking out of turn and I shall say that to the chief executives of the passenger transport executives. They know that that is my view.

None the less, the amendment is—I have not used this word yet, so I shall use it now—otiose, in that what it seeks is already in the Bill. Subsection (9) introduces a new duty on the ORR to have regard to securing value for money for those who make public funds available when it exercises its functions. Funds provided by passenger transport executives are also mentioned in the proposed new section 4(5D)(b) of the 1993 Act. I am in correspondence with Mr. Scales about that. That provision does what the amendment would do, so the amendment is otiose.

There would be other dangers in accepting the amendment. Its meaning and the meaning of what is already in the Bill might seem the same, but the different wording is important. Local authority budgets are not ring-fenced, so authorities have the flexibility to focus funds where they can be best utilised, taking into account local circumstances. The reference to ''funds available'' in the amendment could therefore be interpreted as referring to all the funding that a PTE receives, as all of it could be used for rail. I imagine that that is not my hon. Friend's intention because the PTE's duties go far beyond simply rail services. The Bill refers to funds that are or are likely to become available, meaning that the ORR will consider only the funding that the PTEs are likely to expend on railway services and the PTE funding of which it has been notified.

The amendment should be gently rejected on two fronts. First, because its intentions are dealt with in another part of the Bill. Secondly, because if we were to accept it, it would not meet the aims for which I am sure that it was intended. I shall meet the beloved Mr. Scales tomorrow, along with other chief executives, and shall put the point as forcefully to him. I have no doubt whatsoever that he will be just as forceful in his retort. In those circumstances, I ask my hon. Friend to withdraw the amendment.

George Howarth (Labour, Knowsley North and Sefton East)

I am grateful to my hon. Friend the Member for Harrow, East (Mr. McNulty). I take no offence from the failure of the hon. Member for Cities of London and Westminster to identify my constituency correctly; I am sure that his heart was there, even if his head was not.

Before I conclude, I should say that I am heartened by the observations made by the Minister. For the benefit of the Committee, a little explanation about his relationship with Merseyside might be helpful. Apart from being a student there, during which time he assures me that he frequented certain disreputable premises in and around the city—we will not go any further than that—

Win Griffiths (Labour, Bridgend)

Did he travel by train? That is the question.

George Howarth (Labour, Knowsley North and Sefton East)

The particular premises that I have in mind mean that had he gone there by train, it probably would not have been on any tracks.

My hon. Friend has a close relationship with Merseyside that goes beyond that. Just as he holds Merseytravel in high regard, it holds him in high regard. I should add, briefly because it is slightly beside the point, that he is a great hero of the taxi drivers in Liverpool. When there was an attempt to deregulate them some 18 months or so ago, there was a write-in campaign to my hon. Friend from the taxi drivers and every single one of those letters started, ''Dear Tommy''. From thereon in, he will always be known on Merseyside as Tommy. However, in view of the warm remarks that he has just made, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

David Wilshire (Conservative, Spelthorne)

On a point of order, Mr. Griffiths. Would it be in order for any Member who wants to give the Committee a tour of his constituency to bring a map, so that we could all have a copy and know where they are talking about? It is a far-off place, up there.

Win Griffiths (Labour, Bridgend)

Everyone will have heard that.

Question proposed, That the clause stand part of the Bill.

Greg Knight (Conservative, East Yorkshire)

I am pleased that, in Liverpool at any rate, the Minister is more popular than my hon. Friend the Member for Henley (Mr. Johnson).

In this age of freedom of information and the public's right to know, which we support, if the Bill becomes law we will face a position in which Scottish Ministers and Members of the Welsh Assembly debate, publish and consult on a strategy for railways without the guarantee that the public will be engaged to the same extent by the Secretary of State on the railway strategy and policy in England. What assurances can the Minister give us that he will enter into the spirit of ensuring the dissemination of knowledge on the Government's strategy for England? Will we, for example, have an annual debate on railways in Government time in the House?

Tony McNulty (Labour, Harrow East)

As I have said in our deliberations on these and previous amendments, we fully intend to carry on issuing documents, including our departmental annual report and, I would guess, updates on our rail strategy, following both the rail and transport reviews. That will continue. Sadly or otherwise, it is not in my gift to offer an annual debate on rail in Government time, but for however long I am the Minister with responsibility for railways, I shall fully endorse such debates. That is a personal view, however, and I am not a business manager.

Question put and agreed to.

Clause 3 ordered to stand part of the Bill.

Clause 4 - Use of access charges reviews for

Greg Knight (Conservative, East Yorkshire)

As the Committee will see, the clause is not particularly enlightening. It merely gives effect to schedule 4. I therefore have a choice as to whether I should state our views about schedule 4 when we come to it or speak now, because the clause implements that schedule. I think that it would benefit the Committee if I set out our views at this stage, before we get into a more detailed debate on the schedule.

The clause relates to the independence of the regulatory authority. There has been some comment in the press saying that that independence is under threat. I do not believe that independence is the major point. The major point is the jurisdiction of the regulatory authority; in other words, what that authority can do, unfettered by interference from the Government. The Secretary of State's insistence that the ORR will remain independent is to some extent missing the point. It is the scope of its jurisdiction that we should be worried about, because the Bill seriously undermines it, which could jeopardise private investment in the railway industry and in other independently regulated authorities.

The word of the British Government is at stake in their dealings with the private sector, and I hope that the Minister will say how he intends to square what he proposes to do in the Bill with the statement that the Secretary of State made to Parliament in February in answer to a written question tabled by the hon. Member for Scarborough and Whitby (Lawrie Quinn). I look forward to hearing the Minister's reply, because the two statements—the written statement of the Secretary of State on 9 February and the contents of the Bill—cannot be reconciled.

The power to carry out an access charges review—an assessment of the financial needs of Network Rail for the competent and efficient stewardship of the network—is the regulatory authority's most important function. It gives Network Rail, freight and passenger train operators, rolling stock lessors and suppliers, and infrastructure, maintenance and renewal companies the necessary certainty and security that the provider of the national infrastructure, Network Rail, will have enough money for the competent and efficient operation, maintenance and renewal of that infrastructure for five or more years at a time.

In carrying out an access charges review, the ORR is required to apply an important list of statutory criteria, such as the promotion of efficiency and economy in the industry. It is also required to consider the interests of freight and passenger users of the railway, and the growth and development of the industry. It is not allowed to apply political criteria, because it is recognised that the application of short-term political considerations will be detrimental to private sector confidence. So the establishment of independent economic regulation free of political controls has been shown to be essential to private sector confidence and investment in every privatised industry, including the railways. It is that confidence and investment that finally assures the industry of a bright future and gives investors confidence.

The Government have accepted that principle. One of the first things that they did on coming to office in 1997 was give independence to the Bank of England, but they now appear to be refusing to sustain the same principle in the case of the railways, and I ask the Minister why. Until this Bill was introduced, the Office of Rail Regulation or the Office of the Rail Regulator that it replaces had the right to make that assessment and set access charges accordingly.

Under the franchise agreements between the Government's agent, the SRA, and the private sector passenger train operators, the train operators are entitled to indemnities from the Government against any increase in access charges that may be determined by the independent regulatory authority. Those indemnities are extremely important; they are essential parts of the bargain that the state made with the private sector. They are not limited in amount, so they provide that the state will keep the risk associated with the uncertain condition of the assets of Network Rail; the state takes the risk. It was on the basis of that indemnity that the private sector came into the railway industry, and in my judgment, it is on the basis of that indemnity that it is willing to stay in the industry and continue to invest. That is a fundamental part of the relationship and it should not be interfered with as the Bill proposes.

When the last rail regulator decided in December last year on a £7.4 billion increase in Network Rail's income for 2004–09, the Secretary of State publicly welcomed the decision. He confirmed, as he was legally bound to do, that the Government would honour the indemnities in their contracts with the private sector operators. However, I suspect that while that was going on, the Treasury was very unhappy with the fact that the rail regulator's decision had consequences for it. In essence, it was not happy about the indemnities.

What do the Government propose to do? They cannot dishonour their contracts of indemnity, of course, because private sector operators would be entitled to enforce those contracts and the Government would have no defence against any case. It appears that the next best thing as the Government see it is to limit the jurisdiction of the independent regulatory authority, or in effect to cap the indemnities by legislation. That is what proposed paragraph 1G under schedule 4, to which clause 4 gives effect, seeks to do. Paragraph 1G provides that the ORR may raise access charges at an access charges review only to the limit imposed by the Treasury. The limit is stated to be the public financial resources available.

That is a serious interference in the contracts that the state has made with the private sector; it is a unilateral watering down of a valuable provision that the Government now find uncomfortable. It is an amendment without compensation to the private sector operators, whose contracts are being interfered with, and it could well be a breach of the human rights convention. What advice has the Minister taken on whether the provision indeed breaches that convention?

If the Government are prepared to interfere with private contracts to which they are a party to that extent and in that way, it raises serious issues about the constitutional position of any contract with the state for any public project, not just with the railways. If the Government are prepared to use the pen of legislation to change without compensation the terms of a contract that they have come to dislike, what will be the ongoing effect on other projects?

Ministers appear to be ignoring the fact a solemn contract has been undertaken with the private sector ensuring that the state has to pay money in certain defined circumstances. Having committed themselves in a contract to a set of obligations, the Government should not be able to say that they wish that they had not done so and that they are going to change the rules to their advantage.

With regard to the rail review that was announced in January and is partly to be implemented by the Bill, in a written answer to a question from the hon. Member for Scarborough and Whitby published on 9 February, the Secretary of State assured the House, the railway industry and the wider world that the

''railway is and will continue to be a public-private sector partnership.''

Referring to the review, he went on to say:

''The independence of economic regulation has already been clearly set out in my statement . . . The Government also rules out any change to the rights of third parties, which will be protected. There is no question of weakening the effectiveness of economic regulation. The Government recognises that maintaining fully effective and independent economic regulation is critical for retaining investor confidence. There will be no diminution in the regulatory protection of the private sector investors in the railway.''—[Official Report, Monday 9 February; Vol. 417, cc. 1237-8W.]

How can the Minister possibly maintain that this clause and schedule 4 respect those principles and honour those assurances? By interfering in the ORR's jurisdiction, and therefore diminishing the rights of private sector operators to the protection that they are given in legislation, what the Secretary of State said shows how little faith can now be placed in the Government's word. Not only the Government's standing and reputation are at stake in respect of their dealings on the question of sanctity of contract, but those of the country. The provisions are fundamentally objectionable. They should not be in the Bill and we want to see them removed. A few years ago, new Labour got rid of one clause 4; it should do the same with this one.

Tony McNulty (Labour, Harrow East)

With your indulgence, Mr. Griffiths, I shall follow the lead of the right hon. Member for East Yorkshire (Mr. Knight) and conflate the two debates on clause 4 and schedule 4, as one implements the other.

The shame about many of the right hon. Gentleman's eloquent rhetorical flourishes is that I do not recognise the schedule that he was talking about. I have said repeatedly that the Bill is not about negating existing contracts or retrospectively tearing up contractual and financial obligations between various parties. If the world in terms of schedule 4 was as he characterised it, with the unilateral tearing up of contracts and the consequent impact on private investors, I would be a tad fearful if I were a private investor—but it is not as he characterised it.

It cannot be a right starting point for public policy that the office charged with the economic regulation of the railways sets their cost to the public purse. As the right hon. Gentleman said, the Office of the Rail Regulator determined last December that, regardless of Government priorities across the fiscal and budgetary piece and of what they determined in a Queen's Speech or Budget, or in any other fashion, £x billion had to be spent on the railways. I defy any Government to work on that basis across any aspect of public policy. So that is where we start from.

Christopher Chope (Conservative, Christchurch)

Would the Minister accept that that is not what the Office of Rail Regulation says? It says that it consulted with the Government and that the Government had every opportunity to change the amount that would be available or the obligations that would be placed on the railways to deliver outputs.

Tony McNulty (Labour, Harrow East)

I simply would not. I accept half of that. Of course it consulted and there was extensive debate, but under current statute law, the second half of what the hon. Gentleman suggests is wrong. The absolute bottom line under the prevailing circumstances before we made changes is that there is no subsequent recourse of appeal of any description for the Government of the day when the rail regulator determines the final bill. The last stop is with the ORR. For such a significant chunk of public finance, in such a significant and important area of public policy, that simply cannot be right.

The Office of Rail Regulation is charged with economic regulation, and does it extremely well. It puts that in the balance of public and private mix, and that is entirely right. I repeat what my right hon. Friend the Secretary of State said in February:

''There is no question of weakening . . . economic regulation . . . There will be no diminution in the regulatory protection of the private sector investors in the railway.''—[Official Report, House of Commons, 9 February 2004; Vol. 417, c. 1237W.]

There is, and will remain, more than £70 million per week being invested by the private sector. The Association of Train Operating Companies, the principal voice of the private sector in the train operating part of the railways, welcomes the White Paper and the Bill.

All that schedule 4 does is to amend schedule 4A of the 1993 Act, which provides a process by which the conclusions of an access charge as agreed by the ORR are taken forward. In carrying out such a review, which is clearly laid out in schedule 4, the ORR seeks to establish the level of access charges needed by those providing the railway infrastructure, such as Network Rail. Schedule 4 also establishes, as I have said, the formal process for the prior stage of conducting a review. That includes, in particular, how the Secretary of State and the Scottish Ministers make inputs at various stages of the review. It is not a world as described by the right hon. Member for East Yorkshire (Mr. Knight). It is not about tearing up, in such a cavalier fashion as he described, existing contracts, but it is a key element of where we want to get to in terms of the new vision for railways in this country.

Clearly the focus of much coverage has been on the SRA, but our vision was always about a recalibration of all the key actors involved in the railways industry once the SRA was no longer one of those players. It was not simply—I know that it has been characterised in this way—to take the SRA out of the equation. We would be left with exactly the same arrangements with the Department for Transport: the Government would do the SRA bits and the relationships between Network Rail, the TOCs and the ORR would all be the same as before. There are fundamental changes and a recalibration of the relationship between each of the remaining players left in the rail industry. As the right hon. Gentleman rightly notes, that is an important shift in the definition of the relationship between ORR and Government. He is absolutely right about that point, but not about the subsequent doom and gloom that follows.

As we shall come on to see—not in this Bill, but in the broader context—Network Rail's role changes in the new world, for want of a better phrase. How it relates to the TOCs, the ORR and back to Government, equally, will change. All those elements in terms of the recasting of relationships in rail are very important.

It is worth spending a few moments considering the underlying philosophy of schedule 4, and why its provisions do not undermine the independence of economic regulation or Network Rail's private sector status. The Government are clear that a private company is best placed to provide the operational and management leadership for the rail industry. At the start of a charges review, the Government can articulate the outcomes that they seek and the funding that is available; but it is for the regulator, and him alone, to determine, on the basis of those views, what outputs it is reasonable for Network Rail to deliver and what funding it will need.

The challenges are ones of delivery. A private company is well placed to blend the necessary management, commercial, technical and operational expertise and competencies necessary to meet those challenges. We have always said that civil servants and Ministers are not well placed to deal with the substance or details of such work and should not—we will not—get involved.

The regulator will ensure that Network Rail has the responsibility and freedom to deliver. However, being a private company does not make Network Rail unaccountable—or accountable only to shareholders, as was Railtrack. Network Rail is accountable to the regulator under its licence. It is accountable also to its members, which include passenger representatives, train companies and others involved in delivering rail services. That means that Network Rail works in the interests of all those who have a stake in using or delivering rail services.

That results in a strong and robust structure for delivering rail services, with each party doing what it does best—the Government developing the overarching strategy; Network Rail working in the environment of independent regulation for delivering services for rail users; and the Office of Rail Regulation discharging its duty of independent economic regulation.

In that context, I say as strongly as I can that the fears outlined by the right hon. Gentleman are, in this case, misplaced. It is a recalibration of the relationships, but it is absolutely not a challenge to existing contracts with the private sector. It is not a question of weakening the independence of economic regulation, and there will be no diminution in the regulatory protection of the private sector.

Somewhere in my speech, I have probably moved schedule 4, spoken against the right hon. Gentleman, and spoken pre-emptively against amendments Nos. 50 and 51.

John Pugh (Liberal Democrat, Southport)

On a point of order, Mr. Griffiths. I was going to speak on schedule 4.

Win Griffiths (Labour, Bridgend)

We are having a stand-part debate on clause 4, which leads us on to schedule 4. I have therefore allowed a wider debate on the clause.

Christopher Chope (Conservative, Christchurch)

What the Minister said will not wash. It is not only the fears outlined succinctly and appositely by my right hon. Friend the Member for East Yorkshire that are of concern. Fears have also been expressed by the Office of Rail Regulation itself. The Minister talks about recalibration—another example of Labour newspeak.

Tony McNulty (Labour, Harrow East)

Rather than throwing out an accusation, the hon. Gentleman should provide the Committee with substantive evidence that the Office of Rail Regulation has challenged the provisions of clause 4 and schedule 4—in writing.

Christopher Chope (Conservative, Christchurch)

I will do exactly as I am told. The Minister leads me to the ORR's response to the Select Committee on 4 July 2004. In paragraphs 17 and 18 of its response, the ORR said:

''For the reasons given below, the Government already has all the power it needs in relation to the future financing of the railway. It only requires the will to use it . . . If there is any change to the jurisdiction of the ORR in this respect, it will have to be brought about by legislation. Such a step would be a clear breach of the formal assurances which the Secretary of State gave to Parliament and the financial community on 9 February 2004, which is why the Government should not and will not do it.''

The Government are now doing it, in defiance of the assurances given to Parliament.

Tony McNulty (Labour, Harrow East)

I clearly asked the hon. Gentleman to provide evidence in writing that the ORR is in conflict or otherwise with clause 4 and schedule 4, but all that he has done thus far is read out a report from July. However pressing the issue is, the ORR cannot, in formulating its view, pre-empt publication of the clause and the schedule by five or six months. Therefore, can the hon. Gentleman, as he suggested in his opening remarks, provide evidence from the ORR that it has objected in writing to the clause and the schedule, or will he freely admit that he inadvertently misled the Committee in suggesting that he had the ORR's view on the provisions? By that, I do not mean the view set out in its report from back in July, but its view of the provisions in the Bill, as published last month.

Christopher Chope (Conservative, Christchurch)

It is as plain as a pikestaff that clause 4 and schedule 4 change the economic regulatory regime, and, in anticipation, the Office of the Rail Regulator said during the consultation process that there was no need for the Government to do so because they already had the necessary power in relation to the future financing of the railways. It also said that if the Government acted in the way in which they are now acting, they would be in breach of the formal assurances that the Secretary of State gave Parliament and the financial community on 9 February.

My right hon. Friend the Member for East Yorkshire has referred to quite a lot of what the Secretary of State said in answer to a written question from the hon. Member for Scarborough and Whitby (Lawrie Quinn) at column 1237W on 9 February, but let us look at it again. He states:

''The review which I announced on 19 January 2004 . . . will not change the Government's acceptance of the Regulator's determination of Network Rail's income for the next five years as set out in his December 2003 Final Conclusions and any further conclusions he may reach; and the Government will ensure that the Strategic Rail Authority has sufficient funds to meet its resulting commitments. As I made clear in my statement of 15 December 2003 . . . regulatory promises will be honoured, and the Government recognises, and is content, that only the Regulator can re-open his determinations.''—[Official Report, House of Commons, 9 February 2004; Vol. 417, c. 1237W.]

However, the Bill gives the Government the power to force the rail regulator, against his wishes, to reopen his determinations and to change the whole regime.

Tony McNulty (Labour, Harrow East)

This simply cannot persist. The hon. Gentleman has said again that we are going against the wishes of the rail regulator, leaving the Committee with the clear impression that Mr. Christopher Bolt, the current rail regulator, who is chairman of the ORR, is against clause 4 and schedule 4. We know from his July statements that Tom Winsor is against virtually everything, and that is perfectly fine. However, the hon. Gentleman cannot persist in invoking him and his words in July, giving the Committee the misleading impression that they are the words of the current incumbent at the ORR.

I must tell the Committee—the hon. Gentleman has not been forthcoming with any evidence to the contrary, and it would be wrong, even if he did—that the current ORR is fully satisfied with the clause, the schedule and the relationship that they establish. The hon. Gentleman has given us a nice history lesson, but it is utterly misleading to suggest that the current ORR is against the provisions, because they are not. He can give us a history lesson and wax lyrical about the previous incumbent, but Tom Winsor's views do not prevail today; the ORR is signed up to the clause and the schedule, and it is wrong to suggest otherwise.

Christopher Chope (Conservative, Christchurch)

I am not going to get drawn into discussing who is a stooge of the Government and who is not. What I am concerned about is that the independent ORR—

Tony McNulty (Labour, Harrow East)

On a point of order, Mr. Griffiths. It cannot be in order for the hon. Gentleman to call Mr. Christopher Bolt, the current incumbent at ORR, a stooge of the Government, or at least to imply that. I ask the hon. Gentleman to withdraw that implication, if not the direct reference to Mr. Bolt.

Win Griffiths (Labour, Bridgend)

That is not a point of order. The phrase is used in debate, and does not relate to the proceedings in which Members directly call each other things. I hope that the hon. Member for Christchurch has heard what has been said.

Christopher Chope (Conservative, Christchurch)

Obviously, I have heard what has been said. I said that I did not want to go down that route, and I shall not go down that route.

George Howarth (Labour, Knowsley North and Sefton East)

On a point of order, Mr. Griffiths. Is it not a convention of the proceedings of this House that if an hon. Member—I stress the word ''honourable''—gives misleading information to a Committee or elsewhere, he should correct it?

Win Griffiths (Labour, Bridgend)

The Minister has already pointed out that in quoting from the report and the ORR's view at the time, the hon. Member for Christchurch is accurately reflecting what that office believed at the time. The Minister has also accurately pointed out, however, that with the changes that have taken place, there has been no such direct comment on the Bill itself. We have debated this matter, so perhaps we can move on to the substance of the clause and what it implements in the schedule.

Christopher Chope (Conservative, Christchurch)

I am grateful, Mr. Griffiths.

It is important to consider why it is necessary to introduce the clause and the accompanying schedule at all. The ORR's report is not ancient history; it was published in July, which is only a few months ago. It may be very embarrassing for the Government, who may want to draw a line under it—an expression that is popular with them. In paragraphs 69 and 70, the ORR recognises the following:

''It is for government to decide how it wishes to spend its money. Overall and in the long-term, all government expenditure on the railway is discretionary. But once it has made that decision and entered into binding commitments in that respect—i.e. through franchises or other contracts—it has exercised its discretion and the expenditure has become non-discretionary. Government must honour the commitments it makes. And it must make them in a timely way.

It is of course perfectly lawful for government to make binding commitments—franchise agreements and associated instruments—which last for only a year or two, perhaps three, at a time. This would allow government to sculpt its expenditure obligations to its political priorities and change them from time to time in the short-term.

Such an approach would mean that the railway industry would return to almost the annualised financial regime it had under nationalisation with the attendant harm to private investment, lack of confidence, stability, predictability and the opportunity to make reliable and sustainable plans, but it could be done.''

That is exactly what the Government are doing in clause 4 and the accompanying schedule.

In paragraph 71, the ORR continues:

''Equally, it would be inimical to private sector confidence if the contracts government makes were to provide for a unilateral right of government to turn down the quality or extent of the network on which train operators and their backers rely, unless there were secure provision for the payment of adequate compensation. Even then, it is likely that private sector businesses would be more reluctant to invest in new rolling stock if they face the risk of a politically-imposed slow decline in the quality of the infrastructure on which they must run, for fear of the difficulties, delays and expense of securing adequate financial compensation for the effects on their businesses of that decline. Government does not need this right to act mid-term in the life of a contract. It has all the power it needs to make its plans before franchises and other contracts are let, and to communicate those decisions to the regulatory authority in good time and then allow the system to set the network outputs and the charges accordingly.''

That sets out the ORR's regime and understanding, and that background should inform our debate on the clause and the schedule. One of the Government's problems is that they know jolly well that they could have intervened in the previous debate on access charges, and they could have effected a different result, but they funked doing that because they did not want to take the political blame. Now, they are trying to set up a regime in which they can transfer the blame for such decisions, which have a major impact on the quality and nature of our railways, to the Office of Rail Regulation. That is a despicable way to behave, and the Government are absolving themselves of what should be their full responsibilities.

It is worth reminding ourselves of where the Government reached in the reviews and debates about the level of access charges. The ORR said at paragraph 30:

''There have been two access charges reviews since Railtrack was privatised in 1996. The first concluded in October 2000; the second ended in December 2003. In both cases, government could have acted early to secure a result which would not have led to the increases in access charges which in fact came about. But its engagement would have had to have been much greater. In the first access charges review . . . the degree of engagement by the SSRA (as the agent of government) was not strong, and the regulatory authority was compelled to conclude that broadly the existing pattern of services should be rolled forward, with some improvements in performance. Access charges were set accordingly and Railtrack became entitled to a 50 per cent. increase in its income.

In the second access charges review . . . things did not go according to plan either. Whilst the SRA, the Department for Transport and the Treasury were much more closely involved with the regulatory authority, and had access on a continuing basis to a very large amount of information about the emerging picture as the 15-month review proceeded—which showed by how much the revenues of Network Rail would have to rise to maintain the existing pattern of services—they failed to take the necessary avoiding action which could have led to much lower levels of access charges and compensating grants . . .

In February 2003, the Rail Regulator informed government that if access charges were not to rise substantially at the end of the review (to be announced in December 2003 and take effect from 1 April 2004), the SRA should then (early 2003) be making material changes to its franchising and other strategies to impute lower (and therefore cheaper) network outputs. It would have done this by:

(a) not entering into new franchises for service patterns which implied network outputs as high as the existing levels;

(b) renegotiating existing franchises so as to lower implied network outputs;

(c) exercising rights under existing franchises to lower passenger service requirements; and

(d) negotiating compensation for freight operators to persuade them to lower their network output demands''—

George Howarth (Labour, Knowsley North and Sefton East)

On a point of order, Mr. Griffiths. Is it not normal practice that when an hon. Member addresses the Committee with lengthy quotations, he or she at least references them? The hon. Gentleman seems to be quoting almost at random from a document without giving any referencing or indicating where the quotation begins or ends. That seems an unacceptable way to proceed.

Christopher Chope (Conservative, Christchurch)

I hope that the hon. Gentleman and his hon. Friends have a copy of the fourth special report of 2003–04. If they have and they wish to go through with me the extracts that I am reading from the Office of the Rail Regulator, I hope that they will then be able to join in the debate. I have already said—

Win Griffiths (Labour, Bridgend)

Order. At one point in the hon. Gentleman's speech, he referred specifically to parts of the report, but in the past five minutes or so it was not absolutely clear in my mind whether he was continuing to quote from where he had started or had moved on to another part of the report. I cannot recall his giving any page or paragraph numbers.

Christopher Chope (Conservative, Christchurch)

Recently, I have been quoting from paragraph 34, which is on page 27. Prior to that, I was quoting from paragraphs 30 and 31. I shall now quote paragraph 35, and I hope that the point of order raised by the hon. Member for Knowsley, North and Sefton, East will not have broken the Committee's train of thought.

In paragraph 34, the rail regulator emphasised that the Government had various options that they could have exercised but funked. Paragraph 35 states:

''The SRA did not do these things, possibly because government did not want it to. They would probably have meant cuts in the intensity and geographical reach of existing services, no new services, no new enhancement, severe reductions in the amount of renewal to be done with consequent higher numbers of temporary speed restrictions and poorer performance, and passenger fare rises well above inflation.''

The Government had options, but they did not want to face up to any of the consequences.

Paragraph 36 continues:

''Government and others have to face the fact that, under the existing system, it is not possible to have 100 per cent. of the existing service pattern and the infrastructure which is necessary to support it for 50 per cent. of their efficient cost.''

Paragraph 37 states:

''In July 2003, the regulatory authority asked government what changes to the SRA's strategies were to be made in the light of the regulatory authority's emerging conclusions in the access charges review. The effective answer given was that the regulatory authority should assume that the existing pattern of services would continue and be rolled forward. It was on that basis that the decision in the 2003 access charges review was taken. It is therefore not correct to say that the regulatory authority decided what the pattern of services should be or, in setting network outputs, went against what government intended. Full account of government's settled intentions was taken.''

Paragraph 38 continues:

''In acting as it did, government by default accepted that its subsidy to the railway would have to rise substantially. If it had cut back on the pattern of SRA-supported services and the intensity of the demands which those services would make of the network, government would have faced a much lower bill. But, as explained above, this would have required government to face the political consequences of severe cuts.''

We are talking about the Government not wanting to face the political consequences of severe cuts, but also being embarrassed about the financial consequences of maintaining the railway in its present condition. They have fudged and funked the matter during the course of this Parliament. Under the auspices of the Bill, they are now trying to enable themselves after the next general election to make cuts in services and railways, to increase fares and so on, and to try to transfer the blame to the new Office of Rail Regulation. That is intolerable, and I hope that if nothing else has been achieved by my right hon. Friend the Member for East Yorkshire in drawing attention to this matter, the public will realise what the Government are up to.

John Pugh (Liberal Democrat, Southport)

We have had a slightly intemperate debate on an important clause and the subsequent schedule. The system in our country that we are trying to regulate is one of private companies renting trains to private operators franchised by public bodies that run on track owned by private but not-for-profit companies that are subsidised by other public bodies in the public interest, adjudicated by an independent public body, with the backstop of the Competition Commission. That is a somewhat Byzantine arrangement, which needs a fair degree of sorting out. I wonder who invented such a complex and difficult to run system.

When we survey those facts, it has to be said that there is not a perfect market—we are not dealing with a standard marketplace in any sense. Uncannily, it does not always work smoothly. Criticism so far has been directed at the peculiarities of that particular market. It has been fiercely criticised because it has involved huge amounts of public subsidy going to private companies, which have shouldered very little risk in the process. That is why people are trying to change or tighten up some of the arrangements, while preserving some of the features established by a previous Government.

All clause 4 and schedule 4 do is to provide that when the complex Byzantine system breaks down it can be reviewed reasonably coherently, and lay out a way in which that can be done and a set of procedures associated with that. The provisions put various triggers in place whereby affected parties can get access charges reviewed.

The bulk of schedule 4 seems sensibly inclined towards getting people to share as much information as possible. A number of the paragraphs in schedule 4 begin by saying that information should be provided by one person to another. The clear implication is that in the past decisions have been made without adequate information or without adequate notice being taken of the interests of all the affected parties. To that extent, that has to be a bit of progress. Nobody is against information being shared and people taking notice of all the priorities of all the parties concerned.

The meat appears to be in new paragraphs 1G(1) and 1G(2). The right hon. Member for East Yorkshire pointed out that 1G(1) was the real bugbear here. It does slightly change the rules of the game. It states:

''The Office of Rail Regulation must conduct an access charges review in the manner that it considers is most likely to secure that the implementation of the review will make the best and most practicable contribution to the achievement of—

(a) what the Secretary of State wants to be achieved''.

That is an adjustment to the market. Given that the Government are putting considerable amounts of public funds into the process, it is not an improper adjustment.

Neither paragraph alters who ultimately makes the decision. 1G(2) concludes:

''it is to be for that Office to determine, for the purposes of the review, how much of what is wanted should be achieved''.

It then adds that if the public funds do not accommodate what the Secretary of State wants, the ORR will make the decision about what is to be done thereon. No private company will be put in a position of having to deliver some public good that is clearly not resourced for. That strikes me as fair, as does 1G(1), because it simply adjusts the rules of the game in such a way as to make it impossible in future for the rail regulator to splash out huge amounts of public funds against the public interests. That cannot be a proper thing for any public body, independent or otherwise, to do. It was severely criticised by the Select Committee.

There is a change in the market here. I think that the Minister will be honest enough to admit that. But we never had a perfect market in the first place. No one should pretend that any of the players entered it believing or understanding it to be a perfect market. If they did, they simply did not understand what the privatisation of railways had involved.

Tony McNulty (Labour, Harrow East)

That is a fairish reflection. I would only challenge the hon. Gentleman's point about there being a fundamental change to the market. There is not. There is a fundamental change to the relationship between the ORR and the Secretary of State. The Government set the strategy and the ORR is still absolutely responsible for economic regulation. That is not appropriately characterised as a change to the market, but it is a substantive change to the relationships within, as I suggested earlier. There are substantive changes, post-SRA, to the relationships that exist in the rail industry. We made that clear. That is essentially the purpose of the Bill.

The hon. Member for Christchurch was 100 per cent. wrong in what he said. I repeat purely for the record that when he refers to the ORR he is referring to the previous incumbent and a report that predates the Bill by some five or six months. The hon. Gentleman is free to characterise the ORR as a stooge; it is a shame that he did not withdraw that remark but by implication that was there. The previous incumbent and the ORR are, as of today, perfectly comfortable and relaxed about schedule 4 and clause 4.

The notion that schedule 4 is about disengaging the Government from blame or decision making could not be further from the truth. Schedule 4 is about requiring the Government to engage fully in, among other things, a review of access charges. It is not about transferring blame for unpopular decisions to the ORR. Its point is to ensure that it is clearly the Government who determine rail strategy, fully taking into account all their obligations to private sector contracts, and the effects of those on the total funding needed for the railways. It must make sense. The Government have set out a strategy for their outputs: yes, of course, independent economic regulation; and yes, of course, a regular quinquennial review of Network Rail and what it needs for the forthcoming five years. All that makes perfect sense. With the best will in the world, the hon. Gentleman's intemperate rant is entirely for the birds.

John Pugh (Liberal Democrat, Southport)

Will the Minister clarify one point, which is important for the rail industry? New paragraph 1G(1) of schedule 4 does not anticipate, so far as I understand it, that in the process of reviewing access charges there will be any reneging on contractual responsibilities entered into by a private operator with any franchiser.

Tony McNulty (Labour, Harrow East)

I repeat that the Government are not in the business of reneging on extant and live contracts freely entered into, either, specifically, in terms of a review—although I repeat that I am no lawyer—or, in the wider context, in the transition from where we are now and where we want to get to in the railway industry. That is simply not the case. To cast it as almost renationalisation without compensation, as the right hon. Member for East Yorkshire did, is an over-characterisation, to say the least.

The ORR is very comfortable with the Bill, as is the wider industry, not least the private sector. It recognises the risk of recalibration without challenging at all the independence of the economic regulator, and that fits in well with our new vision and structures for the rail industry. In conclusion, I commend clause 4 to the Committee and reserve the right not to say much more about schedule 4 at all.

Win Griffiths (Labour, Bridgend)

I should like to make a ruling to give hon. Members some guidance before we get on to the two amendments to schedule 4. We have had quite a wide-ranging debate on what clause 4 seeks to do in schedule 4, and I am minded not to have a wide-ranging debate on schedule 4 unless a member of the Committee specifically tells me which parts of schedule 4, outside the issues that have already been discussed, need further discussion. I shall need a very clear indication that an hon. Member wants to look at parts of clause 4 that have nothing to do with the debate that we have had so far.

David Wilshire (Conservative, Spelthorne)

On a point of order, Mr. Griffiths. Would you clarify whether the two amendments to schedule 4 standing in my name will be debated?

Win Griffiths (Labour, Bridgend)

Yes, amendments Nos. 50 and 51 will be debated. However, I want it to be clear that we have had a very good debate on the principle of what schedule 4 is trying to do by having clause 4 in the Bill. I do not want to go over the same ground in a general debate on schedule 4. If an hon. Member wishes specifically to consider parts of schedule 4 that are not covered by the amendments and have not been covered by this debate, I shall listen to what he or she has got to say before I give a ruling on whether I shall allow further debate.

Greg Knight (Conservative, East Yorkshire)

That is a very fair ruling, Mr. Griffiths

We now have a new adjective to cover a whole range of unacceptable behaviour, such as breach of trust, breach of faith, using legislation to water down commitments and cutting the jurisdiction of the regulator. The word is ''recalibration''. It is a reneging on the commitment given by the state to the private sector; it is objectionable to my party and we shall oppose it.

John Pugh (Liberal Democrat, Southport)

I wanted to make the simple point that ''recalibration'' is a noun.

Question proposed, That the clause stand part of the Bill.

The Committee divided: Ayes 10, Noes 4.

Schedule 4 - Reviews by ORR of access charges

David Wilshire (Conservative, Spelthorne)

I beg to move amendment No. 50, in page 88, line 26, at end insert

', which must be published within one month of their receipt'.

I cannot recall whether you had the misfortune to hear my detailed argument about why time limits should be set when something is decided on, Mr. Griffiths, but I will spare the Committee a repetition of that. The argument applies all over again, but if you missed it in the first instance, I commend the report of the proceedings to you, where you will find a cogent argument that will persuade you, even though it did not persuade the Government.

Where the Secretary of State says that a review should be conducted but the Office of Rail Regulation decides that it should not be, it should be required to put those reasons in the public domain. If the Minister says that of course the ORR will be required to do that, the Bill might as well say that it must be.

Tony McNulty (Labour, Harrow East)

I fully anticipate that the ORR would publish its reasons for such a refusal when it tells Ministers. I would not give it one month; rather, it would have to publish at the same time as informing Ministers. The amendment is therefore neither appropriate nor necessary.

David Wilshire (Conservative, Spelthorne)

I take that as meaning that the Minister agrees with me, so no doubt he will introduce an amendment on Report to say that the reasons must be published at the same time. I was trying to be helpful and generous in suggesting one month, but if the Minister thinks that publication should take place at the same time, either he can table an amendment on Report or I will. Given that one month is too long to satisfy the Minister, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

David Wilshire (Conservative, Spelthorne)

I beg to move amendment No. 51, in page 90, line 22, at end insert—

'(k) the suitability of the rolling stock for the type of service being provided.'.

The reason for the amendment is to probe the Government's thinking, although the Minister might say that it is not the best way. The amendment arises from slam-door trains and South West Trains, which serves my constituency and for which trying to achieve anything better out of old rolling stock has been something of a challenge for quite a long time.

I do not want to go back over the general debate about the objectives and standards or the list in proposed new paragraph 1D of schedule 4A to the 1993 Act. However, where there are objectives to be met, standards to be set and improvements to be made but there is a cap on the amount of money available and not enough to replace existing rolling stock, the question of whether certain things can be achieved, given the suitability of what is currently available, ought to be a material consideration. I should be interested to hear what the Minister has to say.

Tony McNulty (Labour, Harrow East)

As he does quite often, the hon. Gentleman pre-empts part of what I shall say, in that we think that the amendment is not the way to do what is required. It relates to a matter of detail that would be far better captured in the newly modified franchise agreements than in the wider strategic outputs referred to in schedule 4. The point is entirely fair, but the question of the use of rolling stock by train operating companies and its suitability will be addressed far more readily through the new franchise contracts than in the schedule.

The other side of the equation is the impact of rolling stock on network costs. As I have said, we are working closely at a general level with train companies, Network Rail and the rolling stock companies to consider how to address that issue throughout the system. We are doing that in relation to rolling stock procurement and more generally. The issue is better addressed in a franchise contract, rather than in the high-level outputs relating to the Office of Rail Regulation. In that context, I ask the hon. Gentleman to withdraw the amendment. [Interruption.] I have just been told that slam-door trains will be off the network entirely next year, but he already knows that, so I will not insult him by saying it.

David Wilshire (Conservative, Spelthorne)

If I heard the Minister correctly, he said that the point is valid and the Government have given an undertaking to consider it in a more appropriate place. Having got that into the record, I am more than willing to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That this schedule be the Fourth schedule to the Bill.

Christopher Chope (Conservative, Christchurch)

May I take this opportunity to ask the Minister when he envisages the next access charge review taking place, bearing in mind the commitment made by the Secretary of State in February this year that nothing would be done to bring forward a review within the five-year period set after December 2003?

Tony McNulty (Labour, Harrow East)

At the risk of boring the Committee, I point out simply that the hon. Gentleman has my right hon. Friend the Secretary of State's commitment from February and I have nothing to add to it.

Question put, That this schedule be the Fourth schedule to the Bill:—

The Committee divided: Ayes 10, Noes 4.

Clause 5 - Railway strategy for Scotland

John Pugh (Liberal Democrat, Southport)

I beg to move amendment No. 9, in clause 5, page 5, line 34, leave out 'may' and insert 'must'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following amendments: No. 10, in page 5, line 35, after 'to', insert 'the development of'.

No. 11, in page 5, line 35, at end insert

'and publish such a strategy annually'.

No. 33, in page 5, line 39, at end insert

'including members of the general public.'.

No. 41, in page 5, line 42, at end add

'(5) The Scottish Ministers shall be obliged to have regard to views and opinions expressed to them before confirming any adoption or revision of their strategy and, if any written suggestions or objections are received by them from any person, persons or body corporate from anywhere within the United Kingdom objecting to all or any part of their proposed strategy within 28 days of the announcement thereof, then the strategy adoption or changes shall be determined by the disputed strategy procedure and the Scottish Ministers shall refer the same to a Strategy Committee set up for this purpose for their consideration.

(6) A Strategy Committee consisting of five members of the Scottish Parliament, no fewer than four elected members representing local authorities in Scotland and one Scottish Minister shall be established to determine the railway strategy for Scotland where the same is disputed.

(7) In the event that the Scottish Ministers are unwilling to implement the decisions of the Strategy Committee, then the disputed railway strategy for Scotland shall be withdrawn.'.

John Pugh (Liberal Democrat, Southport)

The clause relates to the railway strategy for Scotland, on which I am not yet entirely expert. My hon. Friend the Member for Caithness, Sutherland and Easter Ross, however, is fairly insistent that we deal with the amendments, which are relatively minor but significant.

Amendment No. 9 would change the option to have a strategy into a duty to produce a strategy. If Scottish Ministers are to be involved in railways at all, they should know what they are endeavouring to do, and these days most self-respecting bodies seem to have a strategy about more or less everything. Certainly something as significant as railways should be the object of a strategy; that should not be just an option. One does not believe in the ad hoc evolution of railways—it does not happen. Where there is no planning, bad decisions are made.

Amendment No. 10 would insert the words ''the development of''. It is an attempt to offset the rather negative tone of the Bill, which contains many clauses about closure, describing it as network modification. It is a signal to the Scottish railway industry that the Scottish Executive will not only be concerned with the maintenance of existing track and ensuring that it is well run, but will consider how the service can be developed for the benefit of communities throughout Scotland. It would not substantially alter the Bill, but it would give it a positive resonance.

Amendment No. 11 is even less significant in most respects. It simply suggests that the strategy be published annually. We all receive a good number of strategies in our postbags every day, so I am sure that we will be delighted to receive one from Scottish Ministers laying out their future railway plans and that we will read it with the same assiduous care as we do all the other strategies that we receive.

Greg Knight (Conservative, East Yorkshire)

I shall speak primarily to amendments Nos. 33 and 41, which stand in my name and that of my hon. Friend the Member for Christchurch. They are probing amendments: we want to hear what the Parliamentary Under-Secretary of State for Scotland has to say about the points that they raise. It might be that she can convince me that they are not necessary, but I look forward to hearing from her in due course.

In a democracy, we all want decisions to be open and fair, and we want them to be made by people who are willing to engage in discussion and consultation beforehand and to share their thoughts with all those who are likely to be affected before they are confirmed and become strategy.

Clause 5 indicates that that might be the way in which the Government are thinking. Subsection (3), which refers to the strategy that Scottish Ministers will prepare, states:

''Where the Scottish Ministers prepare or revise such a strategy, they must publish the strategy or revised strategy in such manner as they consider appropriate for bringing it to the attention of those likely to be affected by it.''

I am not sure whether those words are intended to encompass people who are contractually affected by the strategy in the narrow sense, such as train operating companies, or whether the Minister envisages that that would apply in the wider contractual sense, ensuring that customers and therefore the public—when one buys a ticket, one is making a contract with the company—may be involved in the process.

Although the clause refers to notification post-decision, it does not tell us what is to happen before a strategy decision is made. I hope that the spirit behind the clause is such that Scottish Ministers seeking to prepare a strategy would engage with the public before they go firm on it and not make policy behind closed doors, informing the public only when it is a fait accompli. That is the thought behind the amendments.

Amendment No. 33 would make it clear that the general public should be involved in the notification process, and amendment No. 41 would set up a procedure that should be followed before the adoption or revision of any strategy to which objections are received within—I say this to my hon. Friend the Member for Spelthorne—a 28-day period. If one is seeking to prepare, publish and pursue a strategy, one does not want to be left in limbo for too long. If there is to be a consultation period, it has to have an end date. That is why amendment No. 41 refers to 28 days.

I start from the position of being against unnecessary bureaucracy and red tape, so I shall not be entirely wedded to the process that amendment No. 41 envisages if the Minister can convince me that it is not necessary. Such provision may be necessary, however, if the Minister cannot assure us that the whole strategy process will embrace members of the public, listen to what they have to say and reflect on it before the policy is confirmed.

Anne McGuire (Labour, Stirling)

I am delighted that we have gone north of the border. I worry about the hon. Member for Spelthorne, who had difficulty in reaching Liverpool on the train. Now that we have crossed from Carlisle—

David Wilshire (Conservative, Spelthorne)

I do know where Scotland is. My sister used to live there.

Anne McGuire (Labour, Stirling)

That is at least a start, because I do not know where Spelthorne is.

David Wilshire (Conservative, Spelthorne)

Does the Minister regularly fly to her constituency from Heathrow? If so, she can come and have a cup of tea with me.

Anne McGuire (Labour, Stirling)

That is the best offer I have had this side of Christmas. To have a cup of tea with the hon. Gentleman would be a delight, even if it were just to see his fantastic array of ties.

We are facing time constraints, so I shall deal quickly with the amendments. The hon. Member for Southport, who I suspect was expressing the views of his hon. Friend the Member for Caithness, Sutherland and Easter Ross, tried to underplay the amendments. He said they were relatively minor but significant. In many respects, they are relatively minor and not that significant. I do not mean any disrespect to the hon. Member for Caithness, Sutherland and Easter Ross, but as the hon. Member for Southport said, amendment No. 9 would place a duty on Scottish Ministers to prepare a strategy, whereas the present requirement gives them the power to prepare that strategy. Giving them that power means that the Bill recognises that Scottish Ministers will be responsible for the strategic development of the railways in Scotland.

The Government do not think it is necessary to place an obligation on Scottish Ministers to prepare a railway strategy. The role in Scotland is equivalent to that of the Secretary of State in England and Wales and the strategy for the railways in Scotland is at the heart of the new role for Scottish Ministers. It is a function that they will carry out as a natural part of their delivery of transport in Scotland. I refer hon. Members who wish to see the Scottish Executive's range of strategies and developments on the future of Scottish transport to the measures currently going through the Scottish Parliament, and to the Scottish Executive's White Paper ''Scotland's transport future''.

The hon. Member for Southport said that amendment No. 10 was about adding a wee bit to subsection (1) to include an element of development in the strategy. It is already implicit, however, that any strategy must necessarily deal with the development of the railways. The amendment would not add anything to the clause as drafted, which will allow Scottish Ministers to make appropriate and sensible decisions about the future of railways in Scotland. They would be unnecessarily constrained if the few additional words that the amendment proposes were included.

I am not sure that publishing a strategy on an annual basis would be the right way to go. I suspect that there are occasions when it may be important to publish a strategy more often or even less often. It would be unnecessary for the Bill to state that we expect an annual report.

I say to the right hon. Member for East Yorkshire that I have some sympathy with the sentiments about consultation expressed in amendment No. 33, which we can all share. The amendment would oblige Scottish Ministers to ensure that when they publish any strategy under clause 5, they do so in such a manner as to bring it to the attention of members of the public as a particular group among those who will affected by the strategy. I am sure that Scottish Ministers share the UK Government's concerns about ensuring that the public—especially those who use the railways or might one day choose to do so—are properly informed.

If the strategy will not affect the public for one reason or another, Scottish Ministers should not be obliged by legislation to bring it to their attention. To be honest with the right hon. Gentleman, my experience of the Scottish Executive is that they would probably do so anyway. They are a very inclusive element of our democracy, so I suspect that the information would be in the public domain. Like UK Departments, the Scottish Executive are diligent about placing the documents that they publish on their website and making them available through other means. In many respects, the Scottish Executive led the way in offering access to members of the public in Scotland through electronic means as well in more traditional ways. I also understand that the Scottish Executive have adopted the principles of the Cabinet Office's code of practice for policy development and consultation.

Amendment No. 41 is slightly more interesting in many respects. I was impressed by the right hon. Gentleman's honesty in saying that he was not thirled—I assume that people know that that means wedded—to this particular amendment. I think that he is right not to be wedded to it, because I suspect that it would be a recipe for chaos for the development of railways in Scotland. I draw hon. and right hon. Members' attention to the fact that if the strategy were objected to from anywhere within the United Kingdom, it would have to be put to some sort of dispute committee under a strategy committee set up to consider the matter. We would have a ludicrous situation in which railway services in the constituency of my hon. Friend the Member for Central Fife (Mr. MacDougall) could be objected to by someone in Southport, the city of Westminster or Christchurch—and I know where Christchurch is. People in all those places could object to a strategy and it would then have to go to a disputes committee.

That is not only bureaucratic but a rather draconian way of trying to ensure that interested parties are engaged in developing a strategy. In the previous debate, indeed, the hon. Member for Christchurch made great play of the fact that it is for the Government to decide. I suggest to the right hon. Member for East Yorkshire that there will be occasions when a decision has to be made, and the decision may not suit everybody. It certainly may not suit somebody outwith Scotland. To give people who are outwith Scotland the right to object, thereby triggering a mechanism that will put those objections to a strategy committee, and to state under proposed subsection (7):

''In the event that that Scottish Ministers are unwilling to implement the decisions of the Strategy Committee, then the disputed rail strategy for Scotland shall be withdrawn''

is a recipe for chaos.

What would be the criteria for a disputed strategy procedure? Are those criteria to be agreed with the Scottish Ministers? If they are outside the Scottish Ministers' hands, how can they be presented with sensible and deliverable assurances? I know that the right hon. Gentleman is willing to be persuaded. Although I have some sympathy with his view that we should engage in consultation that is as wide ranging as possible, I do not think that we should not consider amendment No. 41 seriously, because it could lead to paralysis of the development of the railways in Scotland and, dare I say, impact on other parts of the United Kingdom.

With those few comments—I feel a bit like the night mail train in having to deal with these issues in such a speedy manner—I hope that the Committee will reject the amendments if they are pressed to a vote.

Christopher Chope (Conservative, Christchurch)

Briefly, I point out to the Minister that we have a United Kingdom rail network, with a lot of long-distance services going into and coming out of Scotland. Nothing that she has said will allay the concerns of service operators about the Scottish element interfering to their detriment, so I would be grateful if she could explain how everything will work.

The Minister referred to time constraints, and we now have about three or four minutes left. Sadly, it was the Government themselves who imposed those constraints, so I hope that she will be able to respond in writing to any points that she cannot answer now.

John Pugh (Liberal Democrat, Southport)

I said that these were minor amendments, and we have now had some minor objections to them. I may not necessarily share the Minister's confidence that all Scottish Ministers for ever and a day will be so assiduous that they never fail to produce a strategy, but I take her point. She seems to presuppose that a strategy will necessarily involve development, but that is not the case; it could be a strategy of managed closure. None the less, I shall not press the amendment.

Greg Knight (Conservative, East Yorkshire)

No apology was necessary from the Minister. She answered all the points in a detailed, thorough and comprehensive way, and I think that she has convinced me.

John Pugh (Liberal Democrat, Southport)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Christopher Chope (Conservative, Christchurch)

As we have two minutes left to discuss the clause, may I ask the Minister to explain whether it includes Network Rail operating in Scotland? Will Network Rail Scotland be, in effect, a separate entity under the Bill, or will Network Rail still be funded by central Government, which may mean that it does not make the investment in Scotland that the people of Scotland might want?

Anne McGuire (Labour, Stirling)

To answer the hon. Gentleman's specific point, Network Rail is exactly that—Network Rail, which is a UK body. In this clause and others, we are transferring to the Scottish Executive some of the functions currently undertaken by the Secretary of State in relation to Network Rail in Scotland. Clause 5 gives Scottish Ministers the power to formulate, publish and, from time to time, revise a strategy for carrying out those functions.

Of course, there are some cross-border issues, particularly on the east coast and west coast main lines, but the reality is that there is an almost entirely discrete railway system in Scotland. In the interests of developing a strategic and integrated transport network in Scotland, it therefore seemed sensible to transfer to the Scottish Executive some of the functions currently exercised by the Secretary of State. I hope that the hon. Gentleman will see the logic in that position, notwithstanding his concerns about the impact that decisions might have on areas outside Scotland.

It is in all our interests to ensure that we have an integrated network throughout the UK, and those of us who travel into London not only from Heathrow, but from stations throughout Scotland, understand the benefit of integration. As regards the discrete element of the Scottish railway network, however, this clause and others represent a vital step forward in developing a modern transport infrastructure for the 21st century.

Question put and agreed to.

Clause 5 ordered to stand part of the Bill.

Committee adjourned at twenty-five minutes past Eleven o'clock till Tuesday 11 January at twenty-five minutes past Nine o'clock.